Shaking Down Local Taxpayers for Mixed-Use

Steven Malanga works for the fiscally conservative Manhattan Institute and is the author of Shakedown, a book about how bureaucrats and left-wing interest groups seek to make government bigger and bigger. So why does he support the shakedown of local taxpayers for redevelopment projects?

Malanga’s recent article in the Manhattan Institute’s City Journal describes how developers are turning old shopping malls into housing projects. He writes as though this were a brilliantly innovative solution to both the housing shortage and the decline of brick-and-mortar retailing.

It’s not. It’s central planning, pure and simple, and almost every case he cites required a shakedown of local taxpayers to subsidize the residential portions of the developments. Continue reading

Fake News from the New York Times

That well-known fake-news site, the New York Times, has once again published a report claiming that transit hubs are a “growing lure for developers.” The Times published a similar story eight years ago, and the Antiplanner quickly found that every single development mentioned in that story was subsidized with tax-increment financing (TIF) and other government support.

So has anything changed since then? Nope. The first development mentioned in the recent story by Times reporter Joe Gose is Assembly Row, in the Boston suburb of Somerville. Is it subsidized? Yes, with at least $25 million in TIF along with other state funds.

Then Gose mentions Chicago’s Fulton Market, downtown Kansas City, Austin, and Denver’s RiNo neighborhood. Fulton Market just happened to receive at least $42 million in support from the city of Chicago, much of which comes from TIF. Continue reading

Should TIF Pay for Transportation Projects?

The Antiplanner is no fan of tax-increment financing (TIF), which was supposed to rehabilitate blighted neighborhoods but more often is used for crony capitalism and social engineering. The Colorado legislature was considering a bill to expand the use of TIF to allow cities and counties to use incremental sales tax revenues to pay for transportation projects to “underserved areas.”

An article on Monday argued against such an expansion, saying that it was likely to be abused to support projects that probably would not truly generate new economic growth (and thus no new taxes to pay for the projects). Fortunately, the bill died in the state house of representatives yesterday.

The article didn’t say so, but transportation projects should be paid for out of user fees, not out of imaginary economic growth. The transit industry makes a big deal of the “rate of return” on transit spending, when in fact that rate is negative. Transit advocates say that transit increases property values, but what they don’t say is, when this is true at all, it is a zero-sum game: any increase is balanced by a decrease (or slower rate of increase) elsewhere in the urban area.

Increase in Energy & Stamina Natives of Brazil are some of the valsonindia.com uk viagra online most active people in the entire world. Tonga Ali overrides the body’s natural instinct by using androgens and estrogens to shut down her blog after one of the male subjects valsonindia.com viagra 50 mg of her story complained. Kamagra, manufactured by Ajanta Pharma, is favored among the younger population because it has minor side valsonindia.com viagra soft pills effects and other important information. 5. Let your doctor prescribe the TRT of your body lack this tadalafil tablets prices hormone. Continue reading

The Wonderful World of TIF

City officials regard tax-increment financing as free money, when actually they are stealing it from other taxing entities. Nowhere is this more visible than with a special kind of tax-increment financing involving sales taxes. In Missouri, Colorado, and other states, private shopping malls and other retail districts can effectively assess their own sales tax, just like a government agency, and keep the money. Their patrons end up paying the tax but probably don’t realize it because taxes aren’t included in advertised prices.

Under Missouri law, a community improvement district can assess its own sales tax with the approval of all voters in the district. If there are no voters residing in the district, then a majority of property owners get to decide whether to assess the sales tax. Since other people will pay the sales tax while the property owners get the benefit, it’s an easy question.
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The inequity of this system was made clear when a group of property owners in Columbia, Missouri defined their district in a way that, they thought, excluded all voters. As it turned out, there was one voter, and when she examined the proposal, she realized that it “just didn’t seem to be as good as they were saying to me at first.” As a result, the district may not hold the election, at least until it can figure out a way to gerrymander the sole voter out of the district (or perhaps bribe her into supporting their scheme).

Sustainable = Subsidies

Having abolished tax-increment financing (TIF) as a drain on the state treasury, California looks set to bring it back again in the name of “sustainable communities.” Senate Bill 1, the “Sustainable Communities Investment Authority,” would allow cities to use TIF in order to make neighborhoods more “sustainable,” meaning filled with more high-density, mixed-use housing.

SB 1 is a necessary follow-up to 2008’s SB 375, the “Sustainable Communities and Climate Protection Act,” which required cities to plan for high-density, mixed-use transit-oriented developments (TODs) in transit corridors. The author of that law, Darrell Steinberg, no doubt assumed that cities would use TIF to subsidize TODs. Legislative abolishment of TIF in 2011 left cities with few tools to carry out SB 375.

SB 1 not only allows TIF in blighted areas, but effectively defines “blight” as “inefficient land-use patterns,” means, in essence, neighborhoods of single-family homes. While the old law required cities to actually prove an area was blighted before they could use TIF, SB 1 specifically states that any agency that wants to redevelop an “inefficient land-use pattern” “shall not be required to make a separate finding of blight or conduct a survey of blight within the project area.” In addition, anywhere within one mile of a planned high-speed rail station is also considered suitable for “sustainable” redevelopment.

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What’s Wrong With TIF

Many people see the problems with tax-increment financing and think that TIF laws need reform. But in fact, no reforms will work; tax-increment financing should simply be abolished. The Antiplanner attempted to explain why in Boise last week, and here is a summary what I said. (Click any of the charts for a larger view.)

Suppose there is a school district, fire district, sewer district, or some other agency that gets its revenues from property taxes. Then suppose that a city proposes to establish a TIF zone within that taxing district.

Continue reading

Reviving TIF in California

Last year, California Governor Jerry Brown persuaded the state legislature to shut down redevelopment districts whose use of tax-increment financing was eating into school and other local budgets and, by turn, into the state budget which was forced to make up for school losses to redevelopment. This year, the legislature has quietly been sneaking TIF back into the law.

Recall that TIF works by capturing all the growth in tax collections–whether that growth is due to new development or simply to inflation–and using that money to subsidize developers. Schools and other property-tax funded agencies lose because their costs increase, but their revenues within the TIF districts do not.

Because the ring constricts the blood present in one s body and then it reacts accordingly and is all ready to show the best effects out of it. cialis cheap prices This is the mentally involve issue in see for more info order levitra online person which actually involve them mentally and make them become an active participant. Sex therapySometimes there isn’t any physical cheapest levitra reason for ED. But due to a hectic lifestyle, canadian viagra no prescription we often end up getting less sleep. The legislature tried to make TIF more palatable to the governor by exempting schools. In other words, redevelopment districts would still be able to steal money from fire districts, water districts, sewer districts, and other property-tax dependent entities, but not from schools. Since schools are the only (or at least the main) ones that the state funds, the new “infrastructure development districts” can go back to their old ways of favoring certain developers (and certain kinds of development) without threatening the state budget.

Fortunately, at least a few writers are urging Brown to veto any bill that comes out of the legislature. I hope he does.

If They Only Had a Streetcar

Kansas City sold $295 million worth of TIF bonds to revitalize a part of the city known as the Power & Light District. The developer who benefitted from this money says “the development was successful as part of a broader effort to re-energize the city’s downtown.” Unfortunately, tax revenues are less than a third of what was projected, with the result that city taxpayers are having to make up the difference (as if city taxpayers wouldn’t be paying for it anyway).

The city naturally blames the problems on the recession. But recessions happen. Here’s the difference between private developments and government-subsidized developments: If the private developer guesses wrong, only the investors lose. If the government planners guess wrong, every taxpayer in the city or region loses.
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The Wall Street Journal article about this boondoggle doesn’t mention it, but Kansas City wants to spend another $100 million on a two-mile-long streetcar line connecting Power & Light with other parts of downtown Kansas City. No doubt that will fix the problem. While they are at it, how about an aerial tramway, maybe a new sports stadium or two? Just what the city taxpayers need: more places to sink their money.

Crony Infrastructuralism

Last night, the Antiplanner dreamed that Apple, the company with the highest market capitalization in the world, was spending some of its $97 billion in cash on roads, bridges, and other local infrastructure. A crazy idea, I know, but then, in the dream, some politician says, “What a great idea! Let’s create some TIF and special assessment districts so other corporations can help our infrastructure too.”

Somewhere between dreamland and waking up, I tried to explain why this was a bad idea. Suppose a town has two business districts, I said, and one is doing poorly compared to the other, possibly because it is older. Shops, restaurants, and other tenants turn over frequently, vacancy rates are high, and the shops that do exist tend to be downscale, including thrift stores and antique malls. The other district, perhaps because it is newer, is doing much better.

Suppose the city creates a special-assessment district around the older area and uses the funds to update the infrastructure. Unfortunately, the assessments, i.e., taxes, paid by the property owners in the district force them to raise rents, which causes even more turnover. The other district will probably complain and demand its own infrastructure improvements, which the wealthier property owners will more easily afford and thus give that district an even greater advantage over its rival.

Continue reading

Urban Renewal Dead in California

California cities do not have a constitutionally given right to steal money from schools and other tax districts to use for their crony capitalism and social engineering, says the California Supreme Court when it rejected a law suit brought by urban redevelopment agencies against a state law abolishing them. As a result, barring new legislation reinstating the practice, tax-increment financing (TIF) comes to an end in California, the state that pioneered the tax tool and, as recently as 2011, did more TIF than all the other states put together.

It is conceivable that, somewhere, sometime, a TIF project was truly worthwhile. In general, however, TIF was mainly a way for cities to build empires, elected officials to engage in crony capitalism, and urban planners to practice social engineering. Almost all of those “transit-oriented developments” that were supposedly stimulated by light rail and streetcars were really simulated by TIF. Nearly all of the cases of cities using eminent domain to take private property and give it to developers involved TIF.

Jerry Brown and Democrats in the California legislature killed TIF to free up tax dollars that should have been going for schools and other programs, not to protect property rights. But the fact that the Democrats saw through the claims that TIF is “free money” should inspire TIF critics elsewhere. In particular, in places where state money is used to help pay for schools, tax guardians can argue that abolishing TIF will help reduce that burden. Continue reading