I hope that you were able to read the story in this weekend's
Daily News regarding the plan to use Urban Renewal Law to
implement tax increment financing for the proposed business
park next to Tidymans. The story of Rio Rancho, N.M. and its
disaster with tax increment financing is recounted and there
are extensive quotes from Ron Rankin, an individual familiar with
the pitfalls of tax increment financing schemes.
What Ron and I share is a belief that goverment ought to be
accountable to the people, and the special risks associated
tax increment financing (what he calls corporate welfare) should
be discussed and voted upon by the people affected by the
decision, just as we would vote on any City/County bond issue.
I will be one of the first to support the business park if the
City Council agrees to refer the issue to the people (even
if such a vote is non-binding) and the people decide to proceed
with the subsidized development.
An election will require that people fully understand the
risks/benefits associated with tax increment financing
schemes. We often hear about the benefits of economic
growth. What we don't hear is that the new businesses spur
growth without contributing to the community infrastructure
to sustain existing levels of services because tax revenues
from the development only go to retiring the bonds used to finance
the development. Furthermore, increases in property values
associated with the development that would otherwise lead
to increases in general tax revenues are forgone.
Who pays? Existing residents with more overcrowded schools,
increased traffic, and more expensive fire protection. The
development spurs growth...but there is less money per capita
for services. The Rio Rancho story is telling.
And what if the development fails? The City may not be directly
liable for repayment of the bonds (though the City has an option
under law to underwrite the bonds), but the bond default could
adversely affect the City's financial rating the next time it
needs to float bonds. Unlikely? Yes. But possible. Yes.
As we await (hopefully) the opinion of the attorney general
regarding whether the City acted lawfully, I would encourage
you to support an effort to refer the tax increment financing
scheme to the people for a vote. This is the only way to
get all the issues out in the open.
I said that I would not allow another major development
to come to Moscow through the back door (within my limited
powers). New, major developments ought to come in the front
door with the consent of the people. All I ask is that
this major development (if it includes tax increment
financing) be referred to the people. Front door...with
the consent of the community. I can live with that.
-- Greg Brown (gregb@uidaho.edu) Computer Services Adjunct Assistant Professor, College of Forestry,Wildlife,& Range Sciences University of Idaho Moscow, ID 83843 (208) 885-2126 Fax: (208) 885-7539