TIF
Everybody's happy about the agreement that the schools reached with the city to extend the TIF for 12 more years. Some of the school board candidates are even using the agreement in their campaigns.
As we see it, there are two problems with extending the TIF. First off, the schools are making a deal with the devil, and they are carelessly looking at the short term. The excuse they are using to justify supporting the TIF is that they would lose state aid if the TIF ended, due to the sudden increase in their assessed valuation. The fallacy of that argument is obvious. The loss of state aid would be more than offset by the increase in property tax revenue. The school districts are taxing at the maximum rate already, so a substantial increase in assessed valuation might even allow the tax rate to be lowered. Furthermore, with the very real possibility that a district's overall assessed valuation could decrease over the next few years due to the recession, the schools are going to wish that they had that cushion. If they are already taxing at the maximum rate, no amount of TIF handouts from the city will be able to cover the shortfall from decreasing property values. Remember, the TIF money can only be used for capital projects, not salaries. In 2-3 years, the schools are going to be seeking to raise their education fund tax rates, so they can keep paying the teachers.
This leads to the second problem. The TIF is a de facto way for the city to tax the rural areas. Why? Because the city gets the tax increment from property in the city limits. The schools, library, and county then have to tax at a higher rate to recover the funds lost to the city. Therefore, the rural areas pay higher taxes to fund city projects. Now the argument will be made that the rural areas benefit from whatever the city spends money on, because the rural dwellers shop in town, make use of city facilities, etc. That may be true, but if it weren't for the TIF, the the city would be forced to tax at the realistic rate to cover its costs, and there would be more transparency as to the true cost of the city's services. For instance, the sales taxes the city collects are a fairer way for out-of-towners to pay for whatever city services they are receiving; as are the property taxes those businesses pass along to their customers.
One more thing. Doesn't this whole thing come across as just a little unseemly? That's because everyone involved is cheating. The city is bribing the school districts by letting them at the money two years earlier than they would have otherwise received it. And the selling point is that they get to keep the extra state aid while the city tosses more crumbs. While this is probably legal, that doesn't make it ethical. What kind of lesson are our leaders teaching our kids? The school boards, especially, should be ashamed.
As we see it, there are two problems with extending the TIF. First off, the schools are making a deal with the devil, and they are carelessly looking at the short term. The excuse they are using to justify supporting the TIF is that they would lose state aid if the TIF ended, due to the sudden increase in their assessed valuation. The fallacy of that argument is obvious. The loss of state aid would be more than offset by the increase in property tax revenue. The school districts are taxing at the maximum rate already, so a substantial increase in assessed valuation might even allow the tax rate to be lowered. Furthermore, with the very real possibility that a district's overall assessed valuation could decrease over the next few years due to the recession, the schools are going to wish that they had that cushion. If they are already taxing at the maximum rate, no amount of TIF handouts from the city will be able to cover the shortfall from decreasing property values. Remember, the TIF money can only be used for capital projects, not salaries. In 2-3 years, the schools are going to be seeking to raise their education fund tax rates, so they can keep paying the teachers.
This leads to the second problem. The TIF is a de facto way for the city to tax the rural areas. Why? Because the city gets the tax increment from property in the city limits. The schools, library, and county then have to tax at a higher rate to recover the funds lost to the city. Therefore, the rural areas pay higher taxes to fund city projects. Now the argument will be made that the rural areas benefit from whatever the city spends money on, because the rural dwellers shop in town, make use of city facilities, etc. That may be true, but if it weren't for the TIF, the the city would be forced to tax at the realistic rate to cover its costs, and there would be more transparency as to the true cost of the city's services. For instance, the sales taxes the city collects are a fairer way for out-of-towners to pay for whatever city services they are receiving; as are the property taxes those businesses pass along to their customers.
One more thing. Doesn't this whole thing come across as just a little unseemly? That's because everyone involved is cheating. The city is bribing the school districts by letting them at the money two years earlier than they would have otherwise received it. And the selling point is that they get to keep the extra state aid while the city tosses more crumbs. While this is probably legal, that doesn't make it ethical. What kind of lesson are our leaders teaching our kids? The school boards, especially, should be ashamed.
Labels: government
posted by skepticalmorris at 9:05 PM
6 comments
