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Should tax-increment financing be banned until reform?

BY DI EDITORIAL STAFF | JANUARY 27, 2012 7:20 AM

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Yes

I was listening to John Lennon's classic utopian ballad "Imagine," searching for some metaphor to figure out what is the exact problem with tax incremental financing, more commonly known as TIF.

Then it hit me: Ideally, there is nothing wrong with TIF.

Ideally, again, it makes perfect sense. People coming together to redevelop their cities, bringing business to new markets, and smoothing over relations between businesses and their consumers. TIF is, in fact, a perfect solution to the age-old problem of redeveloping poorer areas and creating new economic opportunities for residents.

But just as Lennon knew, the solution is only perfect if people follow their sense of integrity and seek to benefit society more than their own narrow-minded economic interests — but people are not drinking the same Kool-Aid.

TIF is sucking residents dry in order to benefit a small, concentrated area of big business. The policy allows cities to establish districts called "urban-renewal areas," in which they can divert taxes from school districts and counties to the designated area. If this weren't enough to prove bias toward large growth centers, the cities then give tax rebates to the businesses to effectively eliminate their property taxes.

And this isn't just happening in other parts of the state, but right here in Iowa City. In a study of Johnson County conducted by the Iowa Fiscal Partnership — a joint effort by the Iowa Policy Project and the Child and Family Policy Center — shows TIF has infiltrated our economic infrastructure and "has changed from a tool for redeveloping blighted areas to a means of subsidizing development projects of all kinds, often with little or no public benefit."

Coralville accounts for nearly 69 percent of the TIF value in Johnson County, meaning the taxes paid in neighboring areas, such as Iowa City, are being given to pay for development projects. In 2011, the Coral Ridge Mall Urban Renewal Area, which makes up 54 percent of the entire county's TIF valuation, was given $5 million from the Clear Creek Amana and Iowa City School Districts.

That means high-school students don't get the textbooks they need. That means teachers aren't given the proper tools with which to prepare their students. That means you pay county taxes so Von Maur can sell more overpriced Burberry sweaters. Until a realistic solution can be produced, TIF needs to be eliminated and school districts need to be independent from the shackles of an unfair system.

You can float around in the unrealistic world in which greed doesn't exist and businesses won't exploit children to get rich. But you would be a dreamer, and unfortunately, you would not be the only one.

— Benjamin Evans

No

I agree that TIF reform is probably a bit overdue. But to say that we shouldn't use it until reform is silly.

Sen. Joe Bolkcom, D-Iowa City, echoed similar beliefs this week. In his statement, he mentioned that TIFs account for more than $250 million of statewide funds.

Hmm. So if TIF doesn't work, Iowa is throwing out a quarter of a billion dollars annually for no reason. Is Iowa City is renovating Vito's because people finally remembered how fabulous underage drinking is? Or do they think they might turn a little profit?

I'm thinking the latter. Property taxes are the primary revenue source of most small municipalities. TIFs freeze property taxes on a particular district in hopes that a given project will increase property value, and thus, they rake in more tax revenue. Do these projects tend to turn a profit? Maybe some kind of report on the effects of TIFs in Iowa would help us.

Ah, yes. Property-tax collections of TIF districts increased by 200 per-frigging-cent from 1997 to 2006, according to a report by Dave Swenson and Liesl Eathington of Iowa State University. That's 200 percent growth of TIF districts compared with 23 percent growth of non-TIF districts (adjusted for inflation). Residential increments grew by 503 percent. Why? Because their property values skyrocketed.

Judging from the past and when used properly, TIF funding can double tax-collection within a decade and raise residential property value. For those of you homeowners looking to get the hell out of Iowa in seven or eight years, you should push every TIF forward at almost any cost. Sure, you'll pay a little more in taxes initially, but you'll be able to afford that pool in Colorado when you finally sell your home in Iowa.

Because of their proven success, TIFs can be used a little too much, even to the point of abuse. Taxpayers should not pay for Von Maur to abandon a struggling neighborhood. In anything, taxpayers should pay for more businesses to start up in the Southeast Side.

But until these misuses can be corrected, there's no reason for to handcuff municipalities in need of commercial spark.

— Chris Steinke


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