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Is TIF too tough to get?

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Is TIF too tough to get?

Postby narcoleptish » Mon Feb 18, 2013 10:05 am

Proposed changes to TIF rules to help us compete with other cities for development.

http://host.madison.com/wsj/news/local/ ... 963f4.html

Before the city "loosens" the rules for granting TIF, I think they and the media need to do a better job of explaining exactly how it works, with an emphasis on the payback part. This will be particularly important in the wake of the Edgewater odyssey.

Even some of the brief descriptions of the proposed changes suffer from vagueness or slight legalese.

The draft policy, forged by a three-person EDC subcommittee, would:

• Loosen a rule that limits TIF loans to half the new taxes a project generates over the life of a TIF district.

• Loosen a standard that allows TIF only when a financial gap exists for a proposed project to include other factors for affordable housing or employment-oriented projects, including competitive factors for the latter.

• Eliminate a rule that lets the city share in developer profits.

• Expand opportunities for TIF “pay as you go,” in which a developer finances a project and the city uses some or all of the new property taxes generated to retire the debt.

• Add options to a requirement for developers to make personal guarantees for TIF assistance, such as allowing corporate guarantees or other security for affordable housing, employment-oriented or nonprofit projects.

• Eliminate a rule requiring simultaneous TIF and land use approvals.

• Create target development areas for commercial and industrial projects.


The article includes the usual simplistic explanation of how TIF works:

With TIF, cities and others with taxing authority freeze the value of property in an area, called a TIF district. The city then uses taxes from growth in that area to assist private projects, build streets or make other public improvements. After loans and expenses are repaid, the district is closed and the more valuable property returns to the tax rolls.


This sentence...
The city then uses taxes from growth in that area to assist private projects, build streets or make other public improvements.

...makes it sound like growth somehow happens before assistance is given out. You know that's not the case so why can't it be written in a way that better explains what the case is?

It's not quite the code talking we get from the Fed (quantitative easing anybody?) but to me it's just confusing enough to make me believe that they don't want us to really understand it.
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Re: Is TIF too tough to get?

Postby snoqueen » Mon Feb 18, 2013 10:28 am

http://www.cityofmadison.com/planning/t ... policy.pdf

That goes to a pdf of Madison's TIF policy, 13 pages of it. I'm offering the link as background, not any kind of argument against what you're asking about.

Like they say, "it's complicated."

I think the questions boil down to how much should the city subsidize development within its borders, and in what way. It's a moving target, because every time you subsidize one project, the next half-dozen proposers assume it's only fair you subsidize theirs too. That's understandable, so where do we draw the line?

The part about using the taxes from related growth (around a TIF project) for the public good is not the problematic portion in my opinion. That tends to happen as intended, or at least hasn't been a bone of contention. The question of who gets TIF and who ought to be able to do without has historically been the sticky one.

Does the return of increased tax revenues to the surrounding area start to happen before the TIF project is completed? In a way, I think it does. A dollar is a dollar, and if some street improvements (for instance) are done before the actual increased tax revenues from that particular TIF show up in the city's bank account, I suppose that's part of the process. The city operates on credit anyway, like most other corporate entities. If they have a way to separate out the increase in tax revenues from a TIF district and not use them until they actually show up, I never saw it. Maybe someone in city hall will correct me on this.
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Re: Is TIF too tough to get?

Postby christopher_robin » Mon Feb 18, 2013 10:56 am

Isn't the "free market" move to NOT give anyone TIF or any other incentives? If a development is going to be a moneymaking proposition, isn't that inventive enough to take a financial risk when developing it?

Put another way, doesn't TIF socialize the risks, while privatizing the profits?

Genuinely curious -- this is not my field. Considering me rudely unschooled and educate me on why it makes sense to subsidize private businesses with taxpayer dollars.
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Re: Is TIF too tough to get?

Postby Henry Vilas » Mon Feb 18, 2013 11:24 am

I see that the Cap Times has run another story on Madison's TIF program: Should the city expand its homeowner TIF program?
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Re: Is TIF too tough to get?

Postby snoqueen » Mon Feb 18, 2013 5:40 pm

Isn't the "free market" move to NOT give anyone TIF or any other incentives? If a development is going to be a moneymaking proposition, isn't that inventive enough to take a financial risk when developing it?

Put another way, doesn't TIF socialize the risks, while privatizing the profits?


As originally conceived, TIF was intended to enable projects that were not only in the public interest but would not be possible "but for" TIF assistance. The but-for clause was part of the wording and intended to address just what you're asking about. (see the pdf I linked previously)

The Edgewater developer's argument was that Edgewater could never happen but for TIF funding, which we now see was not the case. That's a bad example (not everyone can talk the Frautschis into helping) but the but-for principle has, in general, been stretched far beyond what many of us consider to be the original intent of the legislation.

It's easy to agree we're socializing the risks but privatizing the profits. What started out as a way to redevelop troubled housing and do other financially-iffy but needed projects has morphed into something quite different. Do I personally like that? No.

But as the original article mentions, nearby cities and towns are offering better TIF deals than Madison is (according to some people's reckoning, anyway) and some people think we need to keep up.

This is not a local problem. Entire states are facing off to see who can offer the biggest relocation bribes (tax credits? cash deals? pick your term) to various companies to get them to relocate or stay. Proving the expenditures to be good ones is not easy -- some companies turn around and relocate again if they get an even better offer. It's a national issue and Madison TIF is but a small example of a small part of the game.

It's hard to tell where this enticement "war" will end. When businesses compete in cutting prices to draw more customers, there's a logical limit. The prices aren't going much below zero for long, in other words. With development enticement, there isn't any such logical limit that I can see.
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Re: Is TIF too tough to get?

Postby christopher_robin » Tue Feb 19, 2013 1:56 pm

Thanks, snoqueen.

You're right, I had completely forgotten about the "social good" aspect of TIF. That's likely because it doesn't come up very often anymore.

As for nearby cities and towns offering better TIF deals than Madison, well, don't they kind of have to? Verona is not an exciting place to live. (Now I am remembering that Frank Bures hit piece on Madison: It's a horrible place, he said. Then it turned out he lived in Verona.)
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