Our Opinion: TIF ruling restores spending oversight to taxpayers

Our Opinion: TIF ruling restores spending oversight to taxpayers

September 10, 2007

Tax increment financing (TIF) revenue bonds for special projects must be approved by taxpayers, Florida’s Supreme Court has ruled. Until now, governments could establish TIF districts and issue the bonds without public vote.

We applaud the Court’s decision to side with Florida citizens. We fear TIF has become another in a long line of “public/private” schemes to sneak corporate sector taxpayer subsidies in under the radar. People should have the right to decide whether that's something they want to pay, for themselves. The ruling portends major consequences, statewide.

Locally, it could put a damper on Pensacola’s Perdido Key Drive and Maritime Park projects. We suspect it might also impact roads and infrastructure upgrades for the proposed Navarre Town Center.

TIF creates special tax zones and reserves their future revenue increases to pay for public projects in those zones – often, to support private development. Over the TIF district’s lifetime, new revenues that would normally accrue to the general public are tied up in debt service.

But if future revenues fall short, as happened with Boca Raton’s $100 million Mizner Park downtown redevelopment, governments must find alternative sources to make debt payments. Sources like roadway, parks and services funding, or perhaps utility bill ‘administrative fees.’

TIF was originally designed to entice entrepreneurs to blighted areas.

But Perdido Key residents have been fighting the road expansion -- expected to help developers cram more homes into the area’s delicate ecosystem -- for years. And the $70 million Maritime Park, of which taxpayers will subsidize at least $40 million, is going in on prime public waterfront.

With taxpayers fronting a big part of the overhead for those projects; we wonder how much private investors really risk losing on either venture. Or how enthusiastic potential TIF district residents are going to be, at the ballot box, about footing somebody else’s bond debt bill.

In fact, we think it’s high time Big Business goes back to financing such ventures the old-fashioned American way -- out of their own pockets – and carry associated debt and business risk on their own shoulders.

Small business owners do it every day.

So why are their well-connected counterparts suddenly exempt from basic market principles -- and in need of public assistance?

After all, they’re certainly not interested in sharing profits with the public – Chamber of Commerce support of tax cuts for the rich, and against minimum wage hikes can attest to that.

Nevertheless, until bond debt is paid, TIF district tax revenue increases are funneled towards debt service. In the meantime, special interests who benefit from the project get to keep ALL subsequent profits.

And we assume profit margins increase proportionately with taxpayer-subsidized capital cost decreases.

Projects subsidized by TIF taxpayer-backed bonds include roads, maritime parks and stadiums. For example, a condo/retail development might need wider roadways or new sewer lines…expensive projects, whose debt takes years, and lots of tax dollars, to pay off.

Speaking of debt: ironically enough, it was our Big Business friends who pushed through Bankruptcy Reform: making it now almost impossible for ‘little people’ to escape debt, even in dire circumstances.

Of course, there’s no need to worry about debt if you can foist it off on somebody else!

Enter TIF - which transfers debt burden from private individuals to the public – by subsidizing key portions of private-profit enterprises. It offers the corporate sector a way to ‘leverage’ public money without paying for the privilege (in the form of interest).

Instead, we pay the interest!

Imagine if a small business owner asked the bank for a startup loan – but he’d only have to pay it back if the enterprise was successful. Using the bank’s own money.

That’s the general idea behind tax increment financing: except we the public are the bank, and our property taxes are the loan payments.

But, say TIF proponents, those projects will eventually ‘benefit everybody’ (especially, we presume, ‘economic development’ experts receiving fat ‘consulting’ fees).

TIF-financed projects are designed to increase property values. That means tax hikes for district residents, who could end up subsidizing the bulk of the bond debt whether they like it or not.

And new homes and businesses add to the tax rolls. Whether they’ll add enough to cover debt payments is part of the risk transferred from developers to taxpayers, as Boca residents discovered. Developers, on the other hand, make a profit up front, when the properties sell or lease (the relative public ‘benefit’ of converting scarce, fragile waterfront to condos and parking lots is another story).

Of course, some TIF projects also incorporate eminent domain seizures, sparing residents any future worries about higher taxes. Despite a new amendment protecting against it, Florida’s legislature can still approve this practice on a case-by-case basis.

But commercial TIF projects might create new jobs, ‘economic development’ gurus insist.

Despite an ongoing American jobs hemorrhage to ‘business friendly’ overseas labor camps -- created by the very folks so graciously willing to accept TIF public welfare subsidies -- this assertion is often accompanied by a PowerPoint slideshow featuring amazingly large ‘ripple effect’ job forecast numbers; and perhaps a white rabbit in a top hat. Presto chango!

Unfortunately, there’s no job growth or salary guarantee – despite the public’s generous contribution towards project startup costs.

And if we’re talking about service and retail industries, or minor league sports largely attended by local fans – we’re talking about heavily recycled income streams – money that’s just redistributed through the system without creating any new wealth.

Indeed, we wonder if diverting future tax $$ from central coffers to pet project bond debt and industry profit doesn’t effectively rob us of the very benefits touted as an excuse to commandeer tax dollars (or assets like waterfront property) in the first place.

What particularly turns our stomach is that the same Big Business interests who rail against ‘socialist’ government health insurance, public transportation, Social Security, unions and other institutions that improve working people’s ability to make a living – have no trouble taking handouts from those same working people to pad their own wallets and/or Chamber trophy wall.

We’re surprised the Court sided with the public this time, but the decision certainly doesn’t solve the problem of politician-industry collusion. It’s just a matter of time before special interests tilt the game back in their favor.

We have a sinking feeling we’re going to see a lot more public infrastructure (like roads and bridges) sold off to ‘public/private’ consortiums in coming years. The end of free-ride TIF loans could mean taxpayers get to pay ever-increasing tolls and fees to use our own roads, parks and other infrastructure.

What’s next, air and sunlight?

After all, Big Business has to make a living, too. Sooner or later, they’re going to grab their cut…and some of yours for good measure. Just give them time to crunch the numbers!