Keeping TIFs from a public tiff

Here’s an interesting link from the Economic Development Corporation of Kansas City about that city’s two-tiered test for tax increment financing for developers.

The curiosity grows out of the growing discord between City Hall and the Sedgwick County Courthouse over how far government should go to utilize all of the tools in its chest to incentivize development, in this case downtown.

It’s a given, I think, that redeveloping Wichita’s downtown – be it office buildings or the arena neighborhood – needs to be a public-private partnership. We’ve spent decades watching nothing happen downtown without it, and the success of Old Town speaks to the potential that tax increment financing brings to our city.

However, it’s also clear that the process needs to be tweaked for the highest level of confidence – and return – among elected officials and the public. Does the creation of a commission and a cost-benefit analysis accomplish that?

  • JWink

    As a civic activist mentioned recently, it would be better if the Wichita City Council quit using these TIF (tax increment financing) districts to white-wash the tax monies they want to contribute to private developers. The city council should go ahead and write checks using the taxpayers money. After the hoopla ends, that’s basically what the City Council is trying to accomplish.

    By paying tax money directly to private developers, the subterfuge of giving the money away on flimsy excuses and reducing taxes for schools and other uses would not be needed by the Wichita City Council.

    Also remember, a special tax is already assessed against property owners in the central business district. This is used to support the so-called Downtown Business Corporation which cost a small fortune to support the “Music Man of Wichita,” Ed Wolverton, who fled for the east coast when the “band uniforms didn’t arrive.”

    As usual in Wichita, looks like everybody is grabbing for the same tax dollars and using the 1/2 billion dollar unwanted, unneeded white elephant downtown ice hockey arena as the excuse.

    Incidentally, can anyone remember who wanted this 1/2 billion tax dollar albatross arena other than the three holdover Sedgwick County Commissioners, TOM WINTERS (soon to be gone), DAVE UNRUH AND TIM NORTON.

    Remember that old Communist Party saying: “Take taxes from the hard working middle class taxpayers of Wichita, all of whom have better uses for their money, according to their talents and abilities …… and give to private developers who want your hard earned tax money to spend on their personal visions and dreams whether or not they have any possible chance of success.”

  • Bill Wilson

    JW, I have a hard time equating TIF money with a direct government handout, since its nature actually is rebated tax proceeds from increased development value. Instead, a TIF, to this layman, actually is a government bet on the success of a development.

    Which isn’t to say that TIFs are perfect development tools. An argument can be made – and apparently is by the county – that the packages are being handed out by City Hall without proper analysis and monitoring.

    Again, it seems dangerous to me to drift away from the public-private partnership to redevelop downtown. That partnership can certainly be improved, but any move away from it is foolhardy, in my view.

  • http://deleted bth

    I find it somewhat amusing that the County complains that TIF money might be used for infrastructure in support of their Arena. County seems to be saying that the City should be paying for that infrastructure directly. NO! That infrastructure should be paid for from the $200+ million sales tax collected.

    In their ads for their Arena the County claimed that the sales tax would cover infrastructure, parking, and operating reserves. Unfortunately cost overruns in construction have depleted those funds. So, the City is picking up the tab for infrastructure. It should come as no surprise that the City would want to shift at least some of that Arena-related cost to other taxing agencies.

    As for “the success of Old Town” I would note that these are other TIFs that are not paying their way.

    Successful TIFs are those that are primarily private-driven. A good example is Central/Hillside; I expect Ken-Mar will be similar. In these cases the public portion acts as a catalyst; in these others (Old Town, WaterWalk, Arena) public money has predomiated.

  • jerry

    “Does the creation of a commission and a cost-benefit analysis accomplish that?”

    I believe that is an excellent start. I would only add that I would set some type of “not-to-exceed” financial number on the City Council and if that was to be exceeded it needed to be on the ballot.

  • bwilson

    There are certainly some parameters that could be established, Jerry. I agree.

    “No TIFs,” though, wouldn’t be one of them, in my view.

  • Freeman

    What is wrong with letting individual actors in the free-market sort out the winners and losers? Why do governments always feel the need to take from some and give to others?

    It isn’t a given that development anywhere “needs” to be a public-private partnership. Governments should get out of the way and let the market work.

  • bth

    I’d like to see a required ration of private:public. I think when you look at the ones I mentioned above you will see that the ‘good’ ones had a large ratio; the ‘not-so-good’ ones a low ratio.

  • ictBest

    I think some of your forget what TIF’s really do.

    What it does it helps pay for the public access improvements in the area. They are not free give-a-ways to developers.

    What the City wants to do is redo the streets (converting some of the one-ways to two-way, sidewalks, street lighting, public parking, tear down blighted and abandon buildings, landscaping and etc. This take a considerable amount of money to do, and what the TIF does it helps pay for that cost by the property tax collected in that district.

    The county and the school district wouldn’t get their take from the area until it was repaid, and that is the ONLY draw back. It is intra-governmental fighting over who gets to keep the tax dollars for their coffers.

    I think that TIF’s are a very good thing. It gets things done.

  • bth

    I agree that they can be good things when used properly. However, when used to pay for things that wuld normally be paid for by the developers (e.g. parking) then I wonder if they are going too far. Even with streets etc – I am paying for the streets in my development myself – while still paying property taxes. An alternative to a TIF in such cases might be a benefit district.

    I favor TIFs in places like KenMar and Central/hillside. In these developments we also have substantial private investment – the TIF is a catalyst. However, in some others the magnitude of public investment is just too large – and these are the ones having problems paying off their bonds.

    My favorite sports bar – Players – had to pay for the parking lot I use when I go there to watch a ball game. Why should their competition (Heros, Oscars) have their parking funded through tax dollars?

  • bwilson

    ictBest and bth make precise and accurate points, with the latter pointing out accurately how TIFs can stray from their intended purpose.

    As for the free market point above, I think history is pretty clear: Downtown didn’t redevelop at all. It deteriorated, and a deteriorating downtown benefits no one. I don’t agree – at all – that the public has no proper role in development.

    I agree with ictBest – TIFs are miscast as a government giveaway. As I may not have been clear enough earlier, they are a tax revenue deferral that’s a bet on the part of governments in the success of a redevelopment district. That would be why it’s essential, I think, for governments to remain vigilant on projects after they grant a TIF.

  • http://deleted bth

    I think there can be another role for local government here – assembling small parcels for re-development. There is a national brogram called ‘brownfields’ that relates to this since in many cases there are also environmental issues to be considered. This also brings in another can of worms – eminent domain. While I instinctively tend to oppose eminent domain there are exceptions. One might be in a situation where many parcels have been assembled via negotiation but a couple of small pieces remain. In some cases, in fact, a fractional ownership might exist where the owner cannot even be found or things are tied up in probate etc. So, some mechanism to assemble these needs to exist.

    Some years ago I discussed this issue with an attorney who specialized in fighting eminent domain matters. Even he agreed that there is a place for its use.

    It is so easy to go out in the country and buy a Section of land from a farmer. It can be MUCH harder to do the same in a City with a hundred owners. Add environmental due diligence issues and a lot of developers will just walk away. So, the need for mechanisms.

  • bwilson

    Or leased, as the ground under the SC Telcom building was prior to its acquisition by the Minnesota Guys. Good point.

    There’s a happy medium that can and should be reached here, and I think the Kansas City model is a start – with citizen and elected oversight. I’m inclined to agree that the city’s been a little too anxious to partner with developers without dealing their constituents in on the decision. It’s just hard for me to find fault with their willingness to buy into these deals.

    The danger still falls, I think, in the short-sightedness of the “no taxes, no way” attitude. Would Oklahoma City’s Bricktown have become an entertainment mecca without a publicly-voted bond issue? The answer is a categorical no, but maybe we can learn something from the approach.

    Without Bricktown, though, Oklahoma City doesn’t become a major league sports city.

  • http://deleted bth

    On eminent domain – it is interesting that my conversation with the attorney was with one who was pretty much a ‘hawk’ on private property rights. However he agreed that there must be exceptions.