TIF plans create controversy in Iowa City


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Local officials and experts say city leaders should be more cautious when using tax-increment financing.

Some say TIFs are often unfairly allocated and also encourage competition among communities.

TIFs are offered by the city government to businesses as incentives to develop in urban-renewal areas, which are often rundown.

Johnson County Supervisor Rod Sullivan said TIFs are often misused and implemented for the wrong reasons. The fund comes from taxpayer money normally allocated to support school districts and local governments.

TIFs have cost Johnson County $38 million over the last 10 years, Sullivan said.

"It's money that would have come to the county but because of TIF, the city captures it," he said.

Iowa City officials supported local business owner Marc Moen with TIF funds this spring to renovate the former Vito's building. The city agreed to give Moen $250,000 in TIF, which covers 12.5 percent of the project.

In a recent forum , city council candidates were asked at a recent forum hosted by the Iowa Cities for Community and the Iowa City Federation of Labor when a project should be supported with TIF.
Each candidate said TIFs should be used "when appropriate."

City-council candidate and University of Iowa Professor Emeritus Jim Throgmorton said TIFs should be used with caution."The law needs to be changed," he said. "We need to use it to facilitate new investments that yield, rather than just shuffle businesses around."

Sullivan believes city councilors use TIF as a political maneuver.

"It's to their short-term benefit, because they can claim we're pro-business, we're pro-growth, but in the long run, they're hurting their own cities," he said. "They're hurting counties, and they're hurting school districts. For short-term political gain, it works."

Using TIF can have a negative impact, because the entities losing out on the tax revenues have no say in TIF developments.

"The basic problem is that it allows cities to divert taxes that would go to cities and school district[s] and finance development projects," said Peter Fisher, a former professor of urban and regional planning and research director of the Iowa Policy Project. "You can't go doing that willy-nilly, or the counties and school districts lose money,"

Fisher said the Von Maur move from the Sycamore Mall to Coralville's Iowa River Landing, partially funded by TIF, is a "blatant example" of how governments misuse TIF.

"It's just not what TIF was supposed to be for. It's supposed to be for economic development," he said. "Iowa City taxpayers are indirectly helping Coralville rob Von Maur from Sycamore Mall."

Sullivan also believes it can create unnecessary competition among cities and expectations of incentives from developers.

"Every city wants to be viewed as competitive and good for business," Sullivan said. "If City A gives away $5 million in improvements, City B says, 'We've got to give $5 million', and then City C says it, and pretty soon everybody expects a TIF."

Loose state laws on how TIF can be used makes it difficult to question city officials, he wrote in a recent blog post.

"[City officials] can look the public in the eye, and say, 'The deal is legal,' " he said.

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