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Tax-increment financing criticized, defended at Coralville forum

This news story was published on January 5, 2012.
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Gregg Hennigan, CR Gazette –

CORALVILLE – Tax policy usually doesn’t get many people excited, but it proved to be a popular, and divisive, topic in Coralville on Wednesday.

A standing-room only crowd of more than 200 people attended a two-hour forum on tax-increment financing at the Coralville Public Library. Many local government officials were there, along with state lawmakers, business people and members of the public.

They came to talk about an economic development tool that some people, including many in the room, believe is being misused.

“In many cases, TIF is used really as nothing more than a cash cow to finance city spending that could and should be financed in other ways,” said Peter Fisher, who studies tax and budget issues and is research director of the nonpartisan Iowa Policy Project.

A study he released in November on TIF use in Johnson County was an impetus for Wednesday’s forum.

So too was the city of Coralville’s announcement in September it would use $9.5 million in tax-increment financing funds to build Von Maur a new department store in the city’s Iowa River Landing Development.

That deal drew criticism from other cities, local developers, state lawmakers and others. Fisher has estimated the deal to be worth closer to $16 million.

State Sen. Joe Bolkcom, D-Iowa City, and Rep. Tom Sands, R-Wapello, who hosted the forum, said legislation to reform the state TIF law would be introduced in the legislative session that starts next week, although what shape it takes and what its prospect would be at the statehouse are unknowns.

A TIF freezes the property taxes on a site at predevelopment levels and diverts the new taxes, or increment, into a fund used by the city. Sometimes the increment goes to a developer of a project in the TIF area or the city might use it for infrastructure work.

Other local governments, like a county and school districts, that typically would get a share of the tax revenue do not get that increment.

Fisher says those entities must increase their taxes to make up for the lost revenue. The state of Iowa also must chip in more for what it provides school districts in student aid, he said.

For example, his study found that the Coral Ridge Mall TIF district causes the owners of an average $200,000 home in the Iowa City school district to pay $80 more annually in property taxes. It’s $319 extra in the Clear Creek Amana school district, which has a big chunk of its tax base tied up in Coral Ridge Mall.

Denise Schares, the CCA superintendent, said when the mall TIF district expires in 2018, that will open up $192 million in property valuation to the school district.

Iowa City Mayor Matt Hayek said his city wants the anti-piracy provisions of the state law reviewed so that TIF cannot be used to get a business to move from one community to another nearby. The city also believes there should be more public notice of such deals.

The Von Maur agreement came with no public debate – in fact, the City Council didn’t discuss the deal as a group until the night it voted on it – and likely will result in the closing of the Iowa City Von Maur.

Without naming Coralville, Hayek said it went against the spirit of the Corridor and regional cooperation.

“This is not regionalism,” he said. “This is anything but regionalism.”

It wasn’t all Coralville and TIF bashing at the meeting, though.

Rep. Dave Jacoby, a Democrat from Coralville and a former Coralville City Council member, said Coralville’s growth has created jobs and sales tax revenue.

“When I saw there was a meeting tonight I thought it was a big thank you” to Coralville, he said.
John Weihe, whose term on the Coralville City Council ended last month, defended the city’s use of tax-increment financing. As an example, he said the University of Iowa Research Park, which has benefited from TIF funds, is home to 1,792 jobs that pay an average salary of $62,613 annually.

“The primary goal of Coralville’s TIF has and always will be economic development,” he said.
The discussion will continue with another forum Saturday, Jan. 21.

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5 Responses to Tax-increment financing criticized, defended at Coralville forum

  1. Avatar

    TIF spreads the wealth UP to the Rich Reply Report comment

    January 10, 2012 at 6:22 am

    Watchdog is right. TIF is a program that takes from the poor and gives to the rich.

  2. Avatar

    Buzz Crumcutter Reply Report comment

    January 6, 2012 at 4:03 pm

    I see TIF as a great ecconmic developement tool when it is used correctly. Many communties have greatly benefitted from TIF over the years. Again…..when used correctly.

  3. Avatar

    Watchdog Reply Report comment

    January 6, 2012 at 6:56 am

    Observer, you are most correct. Tax Increment Financing was created in Think Tanks back in the 70’s as a way to spread the wealth. The American People swallowed the concept hook, line, and sinker.

    TIF is pure socialism and we are crapping in our own nest.

    Back in the 70’s when Iowa put it into law (Tom Jolas lobbied hard for it) I opposed it and wrote letters to Governor Branstad in opposition to no avail. Both parties swallowed the pill and passed it.

    TIF is used as a way to attract jobs to a community and that all sound real great on the surface. Here is the rub.

    When you create a competitive environment between states for jobs, we end up in bidding wars between states. Each state goes to the limit on how much in TAX DOLLARS they will give away to snatch that job away from another state. The business take advantage of us by pitting states against one another because they can get cheaper labor in the move or start up. I have watched that happen 100’s of times over the years. A job will leave one state at 15 dollars per hour and go to another for 9 dollars an hour.

    Now we just lost 6 dollars per hour in GDP and reduce the dollars available to government in the taxing pool. The rest of us have to make up that difference.

    Bottom line: TIF buys down our economy and causes more welfare and burden on the taxpayers.

    We end up kicking ourselves right in the butt and rich get richer and the poor get poorer!

  4. Avatar

    Watchdog Reply Report comment

    January 5, 2012 at 7:25 pm

    TIF is a socialist tool that separates taxpayers from their hard earned money and puts it in the hands of the wealthy.

    Banks should be in the business of loaning money to a business to expand and or start up.

    Out State Government should pull Tax Increment Financing from the Iowa Code. It was wrong to create it in the first place and since has been abused many times in Mason City.

    • Avatar

      Observer Reply Report comment

      January 5, 2012 at 11:09 pm

      Unfortunately Watchdog, there are other states that will allow it, and will lure companies with it, while Iowa would not offer it. So unless nationwide we can put an end to TIF, we would just be slitting our throats. It’s highly competitive out there.