Wednesday, April 15, 2009

Why is TIF Hard to Understand

Why is the concept of TIF so hard to understand?

Take this comment from Lexdan.
Yes I realize that the Web(b)'s would pay up front for the various infrastructure improvements and that they would recoup that money by paying much lower property taxes for many years to come.

The problem I have with TIF is that this is the kind of thing that politicians can pitch as not costing the taxpayer anything since we aren't paying out any money. Yet for the next thirty years we will be raising that much less in taxes which means we will either need to raise taxes or cut other programs. By financing the improvement through the TIF they avoid the normal budget process where the merits of the improvements are weighed against all the other functions of government. This is not the best way to allocate resources.

Downtown is fine. The property values will rise downtown with or without CentrePointe. TIF is not appropriate here
TIF is not a deferring of taxes to the developer. On the contrary, bonds are to be sold on the promise of being repaid by the diverted tax revenue that would normally go to the State. The taxes will still be generated and the project itself will cause adjacent properties to rise in value, thereby causing the revenue stream outside the TIF district to rise. The monies raised from the bonds are them used for public infrastructure enhancements such as sewers, streets and even public art, but only within the district.

In the case of CentrePointe, the City made the district boundary very tight and included mostly public property, while the Distillery District defined a much broader area. This is a key distinction in that, as the Distillery District improves and the adjacent property is redeveloped( by DD or others) the TIF funds will increase to repay the bonds sooner.

Under a deferred taxation plan the properties in a district that did not improve, yet their valuation rose, could defer their taxes till later which is very unfair. These properties would have contributed nothing, gained from new infrastructure and paid lesser taxes.

And downtown is not fine. There have been many studies done which all point to the need for some sort of revitalization. The Mayor, in his budget address, displayed a map with proposed work to be done in the downtown area totaling somewhere near a billion dollars of development. This will be funded mostly by private monies. Only with the completion of these, including CentrePointe and Distillery District, will the values of downtown rise. People will need to gauge the health of downtown from more than the first floor street face and use the upper floors of the older buildings. Something not done on the CentrePointe block before and on few other blocks now.

There should be transparency in all downtown dealings when public funds are involved but where it is strictly private projects and private money, then any and all secrecy is allowed. When we start requiring transparency of all private funds coming into Lexington and a referendum of approval for projects, those projects will STOP.

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