Tax-increment financing criticized, defended at Coralville forum

More than 200 people attend event

Gregg Hennigan
Published: January 4 2012 | 8:17 pm - Updated: 3 April 2014 | 9:51 am in

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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