This video click here explains why the City taking the equivalent of 10%
of total tax revenues out of the public's hands for 25 years can be a real
Tax increment financing (TIF) is taxpayer money that is intended to improve areas that are blighted and would not be otherwise developed but for the use of this money. Neighbors for a Livable Saint Paul (NLSP) contends that the Ford site is neither “blighted” nor undesirable, and it is likely that the property could be developed without the use of TIF or with minimal TIF investment. In fact, the City has stated that the Ford site is the best real estate parcel in the Midwest.
TIF keeps new tax revenues out of the general fund for 25 years; money that would otherwise be used for schools, libraries, roads, and public safety. Furthermore, inappropriate use of TIF for the Ford site is likely to reduce availability of TIF for other projects in Saint Paul where it is more legitimately needed.
TIF projects interfere with free market forces that bring about a more efficient allocation of capital and better location decisions. In the situation of the Ford property, the city is forcing the use of TIF because they up-zoned the property making it more expensive and more valuable for Ford. The city did not allow the property to be developed at a lower level of zoning and allowing free market forces without the use of TIF.
Theoretically, TIF builds the tax base, but inappropriate use of TIF can actually have the opposite effect. TIF projects promise to promote vibrancy, employment, more development, and broader tax base, yet many TIF projects fall short on these promises. The use of TIF is risky under the best circumstances, but Saint Paul’s weak economic climate makes this TIF investment especially dangerous.
Many citizen groups and organizations are advising against the overuse of TIF and advocating for greater transparency and accountability in local economic development subsidies.
TIF is often described as an addiction of politicians. TIF benefits developers and property owners while citizens and local businesses foot the bill.
In 2016, city leaders approved a $275 million Tax Increment Financing (TIF) Request to assure developers interested in the Ford site that there will be enough public money available to reimburse them for building the site infrastructure (streets, curbs, sidewalks, etc.). This agreement has been extended and the total amount is still available. Review of the Melo and Walsh articles in the local press in October, 2019 one might easily become confused as references in those articles to TIF requests are much lower.
Since NEW income from new construction (commercial rent, apartment rental, etc.) built using this enormous tax break must go to bond holders, developers, the HRA or Port Authority for 25 years per the TIF agreement, new costs resulting from construction would need to be paid by the rest of the City's taxpayers during those 25 years, most frequently, this need is felt first by schools which do not have access to the 'increment' to defer costs for new students and must turn, once again to local property owners to help with these new expenses.
A PRICE FOR ‘TIF’
The Saint Paul School District Teachers Union (2018) voted to go on strike beginning Feb. 13. All the issues raised in last week’s news report about that relate to a lack of adequate funding. There’s however no mention of a major reason for this. From my calculation, about $9 million each year is diverted from our public schools to pay debt service, for private development attributed to tax increment financing (TIF). This is done without School Board approval. The worst part is we are committed to this debt for 25 years from the start.
There is very little the city, Ramsey County and our schools have to show for this enormous ongoing expense.
John Mannillo, St. Paul
The writer is co-chair of Saint Paul STRONG
St Paul TIF reports (where are TIF $$$ used in St. Paul?)
2016 Report, St. Paul TIF Districts
TIF in Chicago, the whistle has been blown
This article from the Chicago Tribune describes the TIF Illumination Project and its work to save Illinois taxpayers from TIF wastage.
Many U.S. cities which have traditionally used TIF for development, are experiencing extreme problems as a result. Chicago has experienced drastically reduced educational funds. Kansas City (link above) and many other cities in the nation have had to raise tax revenues to offset losses in TIF developments that did not perform well. Saint Paul has had several years of double-digit tax increases. Will we find end up like these other cities in the future?
TIF funds have been used for development projects in St. Paul since the 1960’s; after all of this time and widespread use (60+ TIF projects! link above), what has been the overall economic impact of TIF funding? After all of these years shouldn’t St Paul taxpayers have started seeing tax reductions rather than double digit increases?
Prior to the widespread use of TIF, commercial property in St. Paul experienced 5% vacancy rates; now commercial vacancy rates typically exceed 20%. Has TIF had a positive or negative effect on business and therefor employment in St. Paul? Specifically, have TIF projects created sustainable jobs or reduced the number of Saint Paul residents who live below the poverty level?
TIF is the primary tool St. Paul is using to create affordable housing. After more than 40 years of using TIF, has St. Paul had an increase or decrease in levels of affordable housing? Have we experienced increases or decreases in average rents?