Fifth Ward council candidates talk about use of tax incentives in Columbia

Saturday, January 26, 2013 | 6:00 a.m. CST; updated 3:55 p.m. CST, Monday, January 28, 2013

COLUMBIA – The candidates for the vacant Fifth Ward seat on the Columbia City Council agree that tax incentives for economic development can be useful, but they differ about how to use them. 

Susan "Tootie" Burns, Mark Jones and Laura Nauser are competing to win the Feb. 5 special election for the council seat vacated by Helen Anthony, who resigned late last year so she could move to the East Coast.

The candidates recently summed up their views about the use of incentives. Burns said she is uncertain whether economic incentives should be used. Jones said they are worthwhile if used correctly and with the proper protections in place. Nauser said that she doesn't like them but Columbia should consider using incentives to remain competitive with other communities.

Columbia's recent experience with economic incentives

The failed effort to establish enhanced enterprise zones in Columbia contrasts with the limited success the city has had with tax-increment financing, or TIF.

The city began a debate about establishing one or more enhanced enterprise zones in Columbia in February 2009. Critics feared the requirement that areas of the city be designated blighted would open the door for the city to use eminent domain to acquire property for redevelopment and would harm property values. Proponents said the economic benefits were worth the designation.

After meeting with persistent opposition from residents, the City Council ended the initiative on Jan. 7.

The city's experience with tax-increment financing has been different since the debate began about their suitability in 2008.

TIFs work by freezing a property's value and diverting the increased property taxes that come with redevelopment back to the developer, who uses the money to help pay for projects that eliminate blight, stimulate economic development and create jobs. Critics said important public services such as schools, fire departments, and police would suffer as tax revenue went to developers promising an uncertain public good. They also said the connection between some types of tax incentives and jobs is uncertain. Research from MU's Harry S Truman School of Public Affairs supports this view.

Three TIF projects have been approved by the council so far, and two are under way, including renovations to the Tiger Hotel and construction of a new DoubleTree Hilton hotel on the former Regency Hotel site. The Odle brothers, Columbia developers, received council approval for a development at Tenth and Locust streets but chose not to use tax-increment financing.

In the past,the city has used incentives to attract businesses and jobs to Columbia. IBM moved to the area in 2010 after being offered $31 million in incentives. Critics said that offer lacked transparency.

The city also offered American Airlines a $3 million revenue guarantee last year to entice it to begin flights to Chicago and Dallas. Its competitor Delta Airlines, which provides flights to Atlanta, said that was unfair and decided to discontinue its service at Columbia Regional Airport.

The candidates each said Columbia enjoys a high quality of life and an educated workforce that bodes well for its future. That's attractive to businesses considering whether to locate here.

Burns would use tax incentives sparingly

Burns said she is keen to develop in downtown Columbia, but she did not agree with using public money for private development.

"If incentives are to be used is a big question," Burns said, "Projects should be evaluated on a case-by-case basis."

Burns cited the Tiger Hotel as a successful TIF project. "It would have been terrible if we would have torn down that building. It is historic, and the renovation has been beautiful."

Critics have said real estate developers with political connections might be in better position to take advantage of incentives such as tax-increment financing.

"I would not be open to pressure from developers," Burns said. 

Despite the benefits derived from TIFs Burns said they are not always necessary. "I think it is exciting that we can attract businesses without incentivizing." 

Burns said Columbia real estate developer Fred DeMarco's experience using private financing in the Flat Branch area is proof that viable projects can move forward without TIF.

Burns' appreciation for tax-increment financing is tempered by the tradeoff involved. "I recognize we are taking away public funds that could go to other resources like schools," she said. 

"If the project could not continue, or would not continue without the TIF money, that is a good measuring stick," she said.

Speaking of the abandoned enhanced enterprise zone initiative, Burns said that community standards are an important driver of economic development and that there is no need to push for an enhanced enterprise zone now. Even so, she added, "I would never say never."

"I have to respect what the community wants, but that doesn't mean that it wouldn't be brought up again," she said.

Jones wants targeted incentives

Jones said Columbia is already a desirable city in the midst of developing a knowledge-based economy. Citing IBM as an example, Jones said the city benefits by leveraging its advantages, particularly when high-technology jobs are in play.

Once the decision has been made to use an incentive, Jones said, "it has to be highly targeted, you have to be sure you are being very open and accountable to the community with those dollars, and there has to be some sort of mechanism to judge the effectiveness of outcomes."

Jones said his philosophy about spending public money involves a "sacred trust."

"When we collect people's taxes, we are collecting their time," Jones said. "That is the most sacred thing a person has. They're working rather than being with family or doing something else they would rather be doing, so we have a real responsibility to take that time and ensure that is is being used properly."

Jones said tax-increment financing must meet the same test he would apply to all proposed economic incentives. "I am supportive if highly targeted, transparent, and accountable."

Jones said he wants economic incentives to include a clawback provision that would allow the city to recapture of tax money if an investment sours.

The proper vetting of projects would assist the council in spending public money wisely, he said. "When we talk about being highly targeted, you want to make sure you are working with people who are in good financial shape."

Nauser's says benefits outweigh drawbacks

Although Nauser said she dislikes economic incentives, she acknowledged that they can be useful in drawing businesses to Columbia. "Being realistic, I understand that they are something we have to maintain in our toolbox."

Nauser said community consensus is important to creating a cohesive vision of  economic development for Columbia. That's an area where the enhanced enterprise zone initiative failed, she said.

"EEZs conjured up the image of government taking from one individual and giving it to another, and I am adamantly opposed to that."

Nauser said she has a better plan: "If property owners in the area want to get together and designate the community an EEZ, that seems to me to be more reasonable."

The former councilwoman said many taxpayers share her misgivings about incentives. Still, "they like the outcomes, because they have a bigger employment base, a bigger tax base, and I can certainly agree with that."

Nauser said Columbia will compete with other college communities in attracting tourism and that the city will play host to more visitors since MU has joined the SEC athletic conference. 

"If we want people to visit us, we have to have a downtown that is attractive to visit. We are going to need hotels for them to stay," she said.

Nauser said tax-increment financing can play a role in building new hotel capacity. "I think for the redevelopment of hotels, they're OK, but I don't like TIFs for brand new projects."

Nauser said she recognizes the risk inherent in using TIFs. 

"I think any incentive can be a success or a disaster, and I think we have been fortunate," she said. "If TIFs are used sparingly with the appropriate financial guards in place so the community is not on the hook, then they make sense."

Supervising editor is Scott Swafford.

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Mike Martin January 26, 2013 | 11:16 a.m.

To say that Columbia has had any success with TIFs -- even limited success -- is a huge overstatement.

As the article noted, the first TIF -- an Odle project -- never took flight. The second TIF -- the Double Tree hotel -- isn't nearly finished. And the third TIF -- the Tiger Hotel -- has been a slow moving train wreck ever since it was first approved for the incentive.

The Tiger required multiple TIF extensions for its original owners because they couldn't get it renovated, even with the incentive:

And it remains uncompleted under the now 2-year-old ownership of Glyn Laverick.

Laverick's presence here, and in every other community where he's done projects, has been fraught with controversy and upheaval:

The Fred DeMarco editorial cited in this story isn't merely an acknowledgement that private capital works as well as TIF. It's a stinging indictment of TIF, for a variety of pointed reasons:

Want business incentives? Lower taxes for ALL businesses, not just a poorly-chosen few.

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