By Evelyn Pyburn
It is commonly believed that the formation of a TIF (tax increment finance) district has no impact on tax levels to property taxpayers outside the TIF boundaries.
If TIFs did not increase taxes, be assured they would not exist. But the increase is a hidden one so it is easy to impose without much push back. The increase happens in a complicated way, while the potential benefits are publically promoted, front and center, so the consideration is always quite lopsided.
This is not to criticize the mechanism of TIFs. They do bring about public improvements and good environments for business growth; the only criticism is about how they come to be necessary at all. It isn’t as though there has never been tax revenues collected to address those needs; they were simply spent in other areas rather than the now “blighted” district.
Most often the motivation behind the creation of a TIF comes from property owners who have historically been ill-served by their governing overlords, and they can hardly be blamed for seeking redress to their situation.
The fact is, other than increasing taxes, there is nothing that a TIF does that any governing body couldn’t choose to do without a TIF. The question is, why don’t they?
Fundamentally , TIFs are tax increasing mechanisms which relieve pressure on general fund budgets, and allow the shifting of other tax revenues, not an unusual strategy behind a lot of special taxes.
Sometimes the situations that a TIF might be created to address, are real head-scratchers. Why was one part of a city left undeveloped while another part was developed? If taxpayers at one end of town were paying their property taxes, why should they still have gravel roads, no sidewalks, no lighting, and no water or sewer lines, while another part of the city has the very latest of all those things? Were those property owners not being treated in a fair and equitable manner all those years by civic leaders?
One has to believe that the statement of one City Councilman, a few years ago, regarding a decision that would have helped an undeveloped area, explains most of that historical decision- making process. ”I don’t own any property in that area,” he blurted out.
No matter what other reasons there might be, the bottom line is that past city administrators chose to focus spending all revenues to the benefit of one area over another. There is nothing that prohibits civic leaders to change that focus, which means that special tax districts are really not necessary if that is truly their goal.
Of course the argument is that the improvements made in a TIF generate growth and hence more tax revenues than would otherwise happen – an argument that is rather spurious, especially when it can be seen that the private sector has been stepping up and making improvements despite their disadvantaged position, or it is sometimes obvious that market potential in an area will eventually overwhelm current negative situations.
But, having paid property taxes for a hundred years with little benefit, one can well understand a group of property owners grabbing onto the idea of a TIF, most eagerly. It targets the problems they face as the result of being historically shortchanged. A TIF allows those property owners to retain the taxes they pay on future growth, and to be in control about how those taxes are used.
But, be assured the shifting of tax dollars would not be met with the sublime calm and equanimity they are, if they were actually reducing tax revenues to city, county or other taxing jurisdictions. It’s no accident that school districts are often an exception to that serenity, because they are closely restricted regarding the flexibility they have in setting mill levies, and they are usually the only taxing jurisdiction that must regularly face voters in seeking approval to meet their revenue needs. School Districts know that the total of property taxes that voters have to pay impacts how they vote when given the rare opportunity to object to taxing levels.
If other taxing jurisdictions were not able to raise their levies to maintain the dollars collected they would not be the least bit supportive of TIFS, no matter what broader community benefits an improved blighted area might create. And state laws structuring TIFS would never have passed any state legislature.
Because of the tax increase potential of TIFS they are probably never going to go away, and given the realities of government and politics they will probably continue to be needed, but just know what it is they really do and that they most certainly involve tax increases.