Ticked Off About TIFs

I'm typically not a fan of the conservative Wisconsin Institute for Law and Liberty (WILL). They're usually the initiators of some harebrained legislation, lawsuit or legal opinion promoting freedom whilst railing against big, bad government. But we really do need more people paying attention to the corporate welfare and subsidies being lavished on private entities through economic development incentives.

So, good for WILL filing a lawsuit on behalf of some Eau Claire taxpayers who say the city abused Wisconsin's tax incremental financing law that includes cash payments to a private developer or company.

The lawsuit argues that the $1.5 million in direct payments and half of the redevelopment payment for the Confluence Project are an illegal property tax rebate for the property owner. That could violate the state Constitution, which says property taxes must be assessed in a uniform manner, said Rick Esenberg, the lawyer for the plaintiffs in the case.

Here's how I described TIFs back in 2008:

Another much touted, yet becoming more so destructive, policy tool is tax incremental financing (TIF). These were initially established to bring investment to blighted, low-income areas. But nowadays, more states are loosening their eligibility requirements and allowing affluent areas to reap the benefits. TIFs allow a municipality to issue a bond to pay for part of the costs of the new development. The property tax revenue generated by the development is then used to pay off the bonds. Some municipalities also allow sales tax increments, where the sales tax generated by the new development can be diverted to redevelopment costs.

In essence, using taxpayer money (cheap credit from a municipality) to finance speculative development where the rewards benefit the usual cast of characters at the expense of the community at large.

WILL's lawsuit is a step in the right direction, but this needs to be passed at the federal level. Otherwise it becomes a local competitive disadvantage. We would be legally prohibited from bribing companies, while other states and cities still would be able to participate in the current economic development blackmail dance.

For Further Reading:
TIFs, Greenfields, and Sprawl
Subsidizing Sprawl, Subsidizing Walmart
Straying From Good Intentions
Shifting The Burden
Recession Shriveling TIF Revenue Returns
Property Tax Abatements and Your School
Legislation Introduced to Help Troubled TIFs

The Job Creation Shell Game

Economic Development, Tax Incentives and The Plutocracy It's Creating