Press
Attempt to Eliminate TIF Windfalls Uncovers Political Umbrage
BILL DRIES | The Daily News
April 03, 2009
A proposal backing a change in the state law governing tax increment financing (TIF) zones died a curious death at the Shelby County Board of Commissioners meeting this week.
Commissioner Mike Ritz, a critic of the TIF concept, proposed the idea of backing legislation in Nashville that would change the rules governing the zones. Under the current law, property tax revenue within a TIF zone is used to finance public improvements or infrastructure such as roads and sewers and even parking garages.
The TIF money goes into a community development trust fund for that purpose. The tax increment is based on the annual tax revenue collected on increased property values. The increase is determined by comparing the annual tax revenue to the annual tax revenue from a base year – the year just before the zone was established.
Ritz wanted state legislators to change the part of the law that deals with how the property taxes for a church or government property – both of which are tax exempt – are determined in that base year.
The windfalls remain
Ritz proposed taxes based on what is paid for that type of property in the base year.
That would eliminate what Ritz called a “windfall” for a developer who buys such property.
“Even though they are paying the government and the church for it, it goes in at zero,” Ritz said. “There’s sort of a windfall to the developer by buying property from the government or a church. … This would eliminate that loophole.”
The change in state law would have made the value the purchase price, and it would not have been retroactive. It was motivated by Ritz’s concerns about the use of a TIF for the $63.5 million redevelopment of two blocks of Highland Street south of Central Avenue. The Highland Row project there included the purchase of the Highland Street Church of Christ.
Rick Copeland, director of the city and county Office of Planning and Development, said Shelby County Mayor A C Wharton Jr.’s administration had no objection to the proposed legislation.
“We can live with it or without it,” he told commissioners.
The response got the attention of Commissioner Wyatt Bunker.
“Why wouldn’t you want to be in support of fixing it?” he asked Copeland. “It creates an unintended benefit and a windfall.”
“I don’t know that I would say it’s a windfall,” Copeland replied, citing the use of the tax revenue for public purposes.
Bunker termed the $4 million spent to buy the church on Highland a “pretty good bit of money.”
“It’s a problem that needs to be fixed,” he said.
“This is a tax policy,” Copeland responded. “This is the body that sets tax policy.”
Bunker then suggested that the administration should defer to the commission on such other tax policies as whether Wharton’s coming budget request should involve a property tax increase.
Commissioner James Harvey said changing the state law wouldn’t necessarily remove a windfall but might remove an “advantage” developers need to be encouraged to take on revitalization projects in certain parts of the city.
Path of most resistance
Ritz’s resolution was defeated on a 6-5 vote. It needed seven votes to pass.
Even if it had passed, it might have been a moot point.
The legislative package is an annual deliberation by the commission as well as the City Council and both school boards. Each body passes individual resolutions urging legislators to support or to defeat bills they favor. In some cases they are bills already pending. In other cases they are bills the bodies have specifically worked on crafting.
Earlier in the same meeting, Commission Chairwoman Deidre Malone said Shelby County legislators have been ignoring the slate of resolutions from the commission.
Shelby County legislators to Nashville are upset over the majority Democratic commission’s appointment of Democrat Matt Kuhn to the District 4 commission seat to replace Republican David Lillard when Lillard recently became state treasurer. The district’s three positions have been held by a Republican since county partisan primaries began in 1994.
“Our legislative packet is not moving and we all know why it’s not moving,” Malone told commissioners Monday.
