Last week I made a presentation to the Colorado Assessors Association on tax increment financing (TIF) subsidies. With the organization's permission, I am sharing the PowerPoint presentation for my talk, as well as adding this introduction.
The talk begins by
putting TIF in the context of subsidies generally. As a subsidy, TIF is
subject to the three main potential drawbacks of their use:
Inefficiency, inequality, and environmental harm. These differing harms
often call forth coalitions that prove the adage that "Politics makes
strange bedfellows." One example was a joint appearance by Ralph Nader,
Rep. John Kasich,
and Grover Norquist in 1997. I was in a similar coalition in 2003
fighting a TIF that would have leveled downtown O'Fallon, Missouri, then
the fastest-growing city in the state. Our leadership included people
from liberal Democrats to future Tea Party members. Similarly, the mayor
and TIF-supporting council members were bipartisan. It's easy to find
single-party governments that abuse subsidies, too, whether it's
now-Governor Kasich offering $400 million to move Sears from Illinois,
or Democratic stronghold Kansas City, MO, offering multiple
multi-hundred million dollar TIFs.
I then go on to
discuss the legal particularities of TIF, which gives it another level of
controversy. Tax increment financing typically allows governments to
capture the property tax revenue of other districts (something
especially hard on school districts), and these revenue fights are
matched by the intense hatred the use of eminent domain usually brings forth.
The very first state to adopt TIF (in 1952), California axed TIF
in 2011 due to its budget crisis, caused in part because the state
reimbursed property tax revenue that school districts lost to TIF. Last
year, a new version of TIF was passed, but it completely removes the
option to take money from school districts, and lets other taxing
jurisdictions opt out as well (see below).
Also of note
in TIF history is the constant pressure to expand the locations able to
use it (i.e., progressively less economically deprived areas want it in
their subsidy arsenal) and the gross overuse of TIF for retail
projects. As I mention in the link, St. Louis-area municipalities gave
$2 billion in retail TIF from 1990 to 2007, creating all of 5400 jobs,
no more than we'd expect on the basis of the area's income growth.
That's why the relevant slide says $2 billion = 0 jobs.
Thanks to Karen Miller of the CAA for inviting me and agreeing to let me post the PowerPoint.
Cross-posted at Angry Bear.