Press
Release
Avoiding The Slippery Slope Of Tax Increment
Financing
December 12, 2007
Mike Ritz is fast becoming the Oliver Wendell Holmes of the Shelby County
Board of Commissioners.
Like the U.S. Supreme Court justice, Commissioner Ritz these days often
delivers a decidedly minority opinion. Sometimes, even his friends appear
concerned that he doesn’t pick his battles carefully enough and that he runs
the risk of being marginalized as a curmudgeon.
Whether that comes true, like Justice Holmes, he's often the great
dissenter, but over time there are some issues where his minority opinion
will eventually become policy. The most recent case in point involves his
futile attempt to place a moratorium on the passage of Tax Increment
Financing (TIF) proposals by the county legislative body.
Who Am I? Where Am I?
In a dramatic demonstration of legislative amnesia, his fellow commissioners
decisively rebuffed him on an issue that seemed on its face to be imminently
logical (not to mention good business, especially considering that there are
more than 10 TIF proposals are now being prepared. His position: To defer
any TIF approvals until there are clear guidelines for evaluating requests
for the public incentive for development.
If the commissioners needed a wake-up call, it would seem that the lessons
of the PILOT (Payment-in-lieu-of-taxes) program would be a valuable
cautionary tale.
After all, that program started with the best of intentions, but before the
Board of Commissioners (following City Council leadership) put the brakes on
it, more than $60million a year in taxes were being waived.
No Big Picture
Toward the end, the PILOT’s were essentially handed out essentially to all
comers who filled out the paperwork for the runaway program. Now, those tax
freezes for new business and expansions have standards and priorities for
the first time, doing more to align the public incentives with public
priorities and also to "size" the public incentive to the promised economic
benefit.
But in the beginning, just as it is now with the TIF’s, decisions on the
incentives will be like shooting in the dark in the absence of the big
picture. If the PILOT program teaches the commissioners anything, it is the
need to step back, set clear expectations and priorities on the front end
for local government and to target incentives to accomplish those
priorities.
Where’s URS Corporation and NexGen Advisors when we really need them?
Bring 'Em Back
Remember them. They were the consultants who produced the 97-page report
about the PILOT program that led to its much-needed overhaul. They called
for the “but for” rule that has now been enacted. Here’s what it means: The
private investment isn’t expected to happen “but for” the public incentive.
This puts the emphasis back where it belongs – back on making sure that the
best rationale is used for deciding where the public’s scare tax dollars are
invested. Without a “but for” test, the consultants said: “This, for all
practical purposes, means that the city/county or other approving bodies may
very well have been giving away tax revenue unnecessarily as opposed to
gaining taxes…”
That, in a sentence, is why Commissioner Ritz’s admonitions about the TIF
program will in time be proven true.
