Chip Taylor

TIF Everlasting

Otis White (I wish he had permalinks) gives a good thumbnail description of the tax increment financing (TIF) process.

A city designated a TIF district and promised developers that, if they built there, the taxes collected above what was already being paid would be used only for the district’s improvement. Thus, if the city were collecting $1 million a year in property taxes and new developments caused tax receipts to soar to $2 million, the additional million would be plowed into sidewalk improvements, beautification efforts or paying for developer subsidies. And there was something in this for governments, too: When the TIF district expired, they’d get the windfall — the tax revenues they’d forgone in the redevelopment period. In other words, cities told school boards, library districts and parks districts, stick with us; there’s a pot of gold on the horizon, and it’ll be yours after awhile.

One element that Otis leaves out: In Missouri, and I believe in most other places as well, TIF was to be used in "blighted" areas -- those areas so run-down, dilapidated, and crime-ridden that they were incapable of attracting investment without some sort of stimulus.

Over time, at least in Missouri, the definition of blight got stretched to include any area in which local officials desired to subsidize development, including the toniest areas of St. Louis County. Combine TIF with permissive eminent domain laws, like you have in Missouri, and you get a real monster. In my opinion, TIF is merely a way for politically-connected real estate developers to get their hands on public funds. But then, I tend to be cynical.

Anyway, Otis points out another reason to be suspicious of TIF: Like an annoying guest, it may not leave when its time has come to an end.

[M]any TIF districts were established in the late 1970s and early 1980s and are set to expire soon. Alas, the pot of gold may remain on the horizon. Reason: Many cities want to extend their TIF districts, arguing that the redevelopment work isn’t complete. Take the elementary school district in suburban Wheeling, which had been expecting an additional $750,000 a year in tax revenues when its downtown TIF was to expire in 2009. Now the city wants to extend it to 2021. “It’s a big deal,” said one district official. “That’s 14 additional staff members.” Not surprisingly, some school districts feel cheated. “Quite frankly, [towns] have told school districts all along, ’Be patient. This TIF district will be good for you,’ ” a consultant who works with school districts says. “And then they extend it to 35 years.”

Really. Can redevelopment work ever be complete?