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Critics say TIF benefits private developers with little input from public

JEFF KEELING • Jan 17, 2007 at 10:42 AM

JOHNSON CITY - Advocates of a tax-based boost to downtown development hope to avoid a tiff over TIF as they push for county involvement in the plan heading into Monday's Washington County Commission meeting.

County consent for tax increment financing (TIF) in Johnson City's redevelopment district would essentially double the money available to fund improvements downtown. But so far, the County Commission has seemed lukewarm to the idea.

Johnson City Development Authority board members and staff say TIF is a tool that could help revitalize downtown without increasing tax rates, give Johnson City more of a "persona," and ultimately bring economic benefits to citizens in and around Johnson City.

What TIF will do in Johnson City is create revenues for redevelopment based on any net increases in property value within the entire redevelopment district, which encompasses a 560-acre area in and around downtown. (Washington County is made up of 210,000 acres, and Johnson City is 25,000.)

For instance, if city property tax revenues within the district were $1 million for the base year, and property values districtwide rose 5 percent over the next year, the additional $50,000 would go to the JCDA TIF fund.

JCDA could issue bonds for downtown projects based upon expected TIF revenues, and also could use those revenues to help fund smaller accomplishments without borrowing.

With county property tax rates just slightly more than the city's, county participation would bump the TIF fund up by a little more than an additional $50,000 in the above-mentioned hypothetical situation.

But while JCDA folks see TIF as a "win-win" situation for all parties, the practice of tax increment financing, if not the concept, has its critics.

In a lengthy piece for the Minnesota Law Review in 2005, Alyson Tomme wrote that as practiced in some cases, TIF is a way for private developers to capture free or low-cost financial help without much public input. Tomme also wrote that "local government at the county level is often ignored in the TIF process."

Tomme suggested that despite TIF distributing public funds through a public entity, "the public is only minimally involved in TIF development projects and is not guaranteed any benefit from such development."

And with no guarantee that growth will create enough TIF funds to pay back bonds, Tomme wrote, taxpayers can be left holding the bag.

Tomme concluded that with TIF an extremely common development tool and surely here to stay, governments would do well to provide for independent review of procedures, and to place more restrictions on private developers benefiting from TIF.

TIF advocates insist the plan for Johnson City is geared toward public benefit, and has the interest of all Washington County taxpayers in mind.

JCDA Executive Director Bridgett Massengill said use of TIF funds will follow a 10-point plan for the revitalization of the downtown area. These include expanding the property tax base and generation of sales tax revenue, eliminating blight, encouraging renovation and historic preservation, and "improving the quality of life for every citizen in the city of Johnson City and Washington County."

Massengill said she is optimistic the TIF district will benefit the public throughout the county. She said if any bonds are issued prior to revenues actually coming in, private developers will agree to shoulder any portion of bond payments that cannot be met by TIF revenues.

"When you improve this area that's the cultural core of Johnson City, and the place that should have the shops and restaurants and things that make every city unique, this community will only be improved and enhanced as a result of putting resources (downtown)," Massengill said.

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