Des Moines Register
08-20-06
Some want more scrutiny for TIF
Fears that financial tool is 'starving' cities, schools persist
BY LEE ROOD AND DONNELLE ELLER
REGISTER STAFF WRITERS
State leaders should re-examine economic development incentives being used
by communities across Iowa to assure they aren't working at cross-purposes to
lure new jobs and businesses, some Iowans say.
A range of Iowans responded to articles Sunday and Monday in The Des Moines
Register about an increasingly popular tool called tax increment financing that
has spurred economic development but left Iowa cities and counties with $1.6
billion in debt.
"The state, city and counties need to get together to develop a uniform plan that
allows them to be competitive ... but you're not just enhancing growth within your
own jurisdiction," said John Haldeman, city administrator of Huxley.
Tax increment financing allows cities and counties to set aside new property
taxes collected in specific development districts to pay for costs related to luring
new businesses, homes or civic attractions. One of the few tools local
governments have to jump-start growth in property tax revenues, the widely used
financing has become controversial in part because it can siphon tax dollars
away from cities, counties and school districts for local services.
This year, Johnson County was blocked from about $2.23 million in tax revenue
because of TIF projects, such as a $60 million hotel and convention center
project in Coralville that opens this month, records show.
Rod Sullivan, a Johnson County supervisor, said he would like state law changed
so all local government groups affected by one community's proposed use of the
financing are also able to sign off on projects. Currently under Iowa law, cities
and counties can approve projects independently.
"If a project really merits the investment, the government body that wants to use
it should be able to convince the others that it's worthy," Sullivan said.
Haldeman said even before Register articles featuring Huxley's heavy debt due
to aggressive TIF use were published, city leaders had begun to mull ways to
reduce their previously heavy dependency on the tool. The city spent almost $1.3
million during its 2006 fiscal year on TIF projects, reserving just $357,000 to
provide services such as snow removal and police protection.
Huxley city leaders recently offered millions of dollars' worth of rebates to
developers who helped lure new homeowners to town. Former Huxley resident
Todd Berner said he believes that has been a primary reason why he has been
unable to sell his five-bedroom home in the small city of 2,400. He bought the
house in 2000 for $240,000 and has been unable to get $215,000 for it so far.
"I'm just appalled," said Berner, who now lives in Independence. "I'm still paying
them taxes, and they lowered my property value."
Des Moines activist Fran Koontz, a member of the city's Plan and Zoning
Commission, said she has felt for many years lawmakers need to put mandatory
sunsets on tax increment financing districts. Under Iowa law, TIF districts created
before the mid-1990s have no expiration dates. As a result, most revenues from
Des Moines' first TIF districts have been captured for development for more than
50 years.
Koontz said all TIF should last no longer than 20 years.
"It's starving our city, our schools and our neighborhoods," she said. "I think its a
wonderful tool if it's used right. But its been misused by big businesses who
eternally have their snout in the public trough."
Nonetheless, Iowa Rep. Clarence Hoffman, R-Charter Oak, a TIF supporter, said
he will introduce legislation again next year that would expand use of the
financing even further.
Hoffman said he believes cities and counties should be able to use new state
sales tax dollars for economic development.
Iowa State University researchers this year found TIF achieved lackluster
results in small and medium-sized cities over the past decade.
But Terry Cox, city manager of Harlan, population 5,300, said small towns need
TIF to attract private investment. The western Iowa city now has about $1 million
in TIF value it can use for economic development and residential projects. Harlan
leaders want to use TIF money to buy about 30 acres and develop lots for about
100 affordable homes - costing $100,000 to $150,000 each. The "work force
housing" is needed to accommodate families attracted to new jobs that local
companies are adding.
"It's the whole chicken and the egg thing," said Cox. "If we don't get
development, if we don't provide homes, schools won't get new kids. It just won't
happen."
However, Cox said, "quality of life" projects now getting TIF dollars - such as
aquatic centers - should go before voters.
"Let residents decide if they want to pay for it," he said.
Reporter Lee Rood can be reached at (515) 284-8549 or lrood@dmreg.com