GEORGE KENNEDY: Nimble politicians manage discussion of proposed TIF project

Thursday, January 23, 2014 | 8:25 p.m. CST

As I sat in on Tuesday evening's City Council discussion of using TIF to pay for upgrading downtown infrastructure, it struck me that Mike Matthes, our unelected, nonpolitical city manager, just might be the best politician in the room. (Or at least the second-best; Donnie Stamper was seated to my left.)

TIF, the shorthand version of Tax Increment Financing, is a controversial tool that developers and officeholders often find useful as a way of generating funds for favored projects without actually raising anybody's taxes.

It is already in play downtown, backing the renovation of the Tiger Hotel and the ongoing construction of the new hotel on Broadway.

Now Matthes is pushing, carefully but determinedly, creation of a huge TIF district to generate the funds that would allow growth to resume in the heart of Columbia. As any good politician would, he made a low-key pitch for his idea while appearing open to other approaches and moving to pre-empt the most obvious objections.

The way TIF works, and a major source of the controversy, is this: Once the building or area to be financed is specified, the property and sales taxes it generates are frozen at their current level. Then the new tax revenue – the "increment" – produced by the project is retained to support that project.

The controversy arises from the effect on all the other entities that share those taxes. In our town, that includes the public schools, the library and the county, as well as the city itself. Those bodies can be denied the extra revenue that comes from the new development for the period of the TIF, usually 20 years or more.

If the new TIF district were to be approved as proposed, it would cover the area bounded by the MU campus on the south, Business Loop 70 on the north, College Avenue on the east and Providence Road on the west, with a bulge taking in the new supermarket. So there's a lot of tax revenue at stake.

There's also the issue, pushed Tuesday by council members Karl Skala and Ian Thomas, of whether developers ought to be required to pay more of the cost of the infrastructure required to serve them. As Skala put it, "We can't any longer be in the business of subsidizing growth."

Matthes had, it seemed to me, a reasonable explanation for his proposal and a plausible response to every criticism.

The TIF is needed, he said, because "a bit of a tsunami in development" has pushed the city's sewers and electricity grid to their capacity. In the past three years, 3,000 student beds have been added downtown. Another 3,000 – not all intended for students – are being proposed. Estimated costs just for necessary upgrades to sewer and power come to $15 million or more.

And to the criticisms and the responses:

Lost revenue to schools and others? The Matthes plan envisions continuing to share enough revenue growth "to do no harm" to taxing bodies outside the TIF area. He said he has already discussed the plan with his counterparts in those entities.

Subsidizing developers? The infrastructure upgrades, he said, would be paid for by the new taxes generated by the developments themselves.

Lack of transparency? Unlike the Transportation Development Districts (TDD's) that surround the city, a TIF must be examined and approved in public multiple times, first by the TIF Commission that includes representatives of all the taxing entities and then by the City Council itself.

The public benefit? TIF revenue could be used for projects beyond sewers and power, he suggested. It could help underwrite the dreamed-of museum district, the signature gateways at the entrances to downtown, the burying of power lines on the Business Loop, maybe even a downtown terminal for the dinner train.

What's the rush? Increasing downtown density to limit urban sprawl is a key "value" in the recently approved comprehensive plan, he pointed out; and the infrastructure to support that is needed before new "smart growth" can proceed.

Aren't there other ways to pay for infrastructure? Yes, there are, he agreed. Those can be discussed, along with more specific dollar figures, at the council's next pre-meeting in two weeks.

It was a masterful performance. The council members contributed, with pointed but not hostile questions and comments ranging from Skala's and Thomas's to Laura Nauser's stated preference for a minimalist approach. The collegial contrast to what we hear from Jefferson City and Washington was striking.

Of course, the public conversation is just beginning. There are still, as Matthes freely acknowledged, more questions to be asked and answered, choices to be made, limitations to be met.

After the session, I approached Thomas, at whose request it was arranged, and sought his assessment.

"It's a good start," he said.

I thought so, too.

George Kennedy is a former managing editor at the Missourian and professor emeritus at the Missouri School of Journalism. He writes a weekly column for the Missourian.

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