When it comes to TIF, municipal officials tend to use a kind of Big Lie technique to get public acquiescence. That is, they just keep repeating the same talking points over and over and over again until they become ingrained in the public memory: "Development would not happen without TIF," "TIF is the only economic development tool we have," "TIF expands the tax base," "TIF creates jobs," etc.
A growing number of citizen activists and public interest advocates are looking more closely at TIF programs. What they are finding shreds the myth of TIF as a cost-free economic development tool.
The January 2006 edition of Reason Magazine includes a must-read piece by Daniel McGraw for anyone interested in understanding the real costs of TIF. He says in part:
Largely because it promises something for nothing—an economic stimulus in exchange for tax revenue that otherwise would not materialize—this tool is becoming increasingly popular across the country . . . Although politicians portray TIFs as a great way to boost the local economy, there are hidden costs they don’t want taxpayers to know about. Cities generally assume they are not really giving anything up because the forgone tax revenue would not have been available in the absence of the development generated by the TIF. That assumption is often wrong.
“There is always this expectation with TIFs that the economic growth is a way to create jobs and grow the economy, but then push the costs across the public spectrum,” says Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation. “But what is missing here is that the cost of developing private business has some public costs. Road and sewers and schools are public costs that come from growth.” Unless spending is cut—and if a TIF really does generate economic growth, spending is likely to rise, as the local population grows—the burden of paying for these services will be shifted to other taxpayers. Adding insult to injury, those taxpayers may include small businesses facing competition from well-connected chains that enjoy TIF-related tax breaks. In effect, a TIF subsidizes big businesses at the expense of less politically influential competitors and ordinary citizens.
In March of 2003 Sean Fitzgerald (publisher of Lake Winnebago B2B) and I had a debate about TIF in the pages of his magazine. The essays are no longer on-line, but in mine I argued that due to the fact that TIFs now more often than not are used in a way that deviates from the intention of the original state law, the state of Wisconsin needs to place a moratorium on the creation of all new TIF districts. A moratorium would allow for the Legislative Fiscal Bureau, Department of Administration, or other agency the time to research the actual costs of TIF (not just the costs reported by municipal planning departments that have an interest in TIF creation) and make recommendations as to how to end abuses of the program.
Additional TIF Resources:
- The New Rules Project on TIF Reform
- Tax Increment Financing: A Few Thoughts by Professor Joseph Persky
- UIC Study Shows Proposed Roosevelt Union TIF Unnecessary
- TIFS: Crony Capitalism by Professor John McAdams
- More Crony Capitalism in the City of Milwaukee by Professor John McAdams
- Bibliography of Documents related to Tax Incremental Financing prepared by the UW Extension Local Government Center
- NEA: Protecting Public Education from Tax Giveaways to Corporations
- COWS: Refocusing Wisconsin's TIF System on Urban Redevelopment
- COWS Proposed Elements of TIF Reform
2 comments:
What would be your alternative to using TIF's? In the case of the Five Rivers development there were no other developers that came forward with proposals for that site. Lets face it, business is not lining up to come to Oshkosh.
Sorry it took me so long to respond. I think TIF programs as they are being applied in all states that use them are based on a flawed, outdated development model. That is, the model of the big investor who will provide tons of jobs for a community in return for the assistance. That's a model appropriate to a time when the bulk of the working population will have a high school education or less, and the bulk of those with higher educations would be expected to provide some kind of service for an employer.
To quote the bard, "The Times They Are A Changin." We now have scores of people who would be able to set up small businesses along an area like the Fox River if they only had some start-up capital. They wouldn't need or even ask for a TIF.
If you get a chance to look at my Media Rant on "Censored in 2005, Part II," you'll notice that I refer to the Wisconsin Democracy Campaign's study on "Serving the Have Mores." Apparently Wisconsin has millions of dollars to dole out to businesses that do not need it and do not even provide good jobs in return for the hand out.
The program that doles out that money ought to be refocsued as a small business start up program targeted to urban areas of the state. An area around the Fox River could end up looking like dowtown San Antonio, Texas; a beautiful river walk with 3 miles of unique shops, cafes, and restaurants and no ugly, half-empty condo complex taking up space.
The city should also spend more time soliciting the advice of people like Dr. Michael Burayidi on the UW Oshkosh campus. Michael has written extensively about redevelopment efforts that do not involve TIF, yet I have always had the feeling that the city is not interested in what people like him have to offer. --Tony
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