TIF deals disrupt market, shift risk

The Gazette Opinion Staff
Published: March 31 2014 | 12:01 am - Updated: 1 April 2014 | 10:20 am in

By Michael L. Richards

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Does Cedar Rapids need a new name? We have become TIF Town.

When businesses compete without political favors or subsidies, efficiency improves and customers benefit. Open market competition is a discovery process, a way to determine what products and business methods best satisfy actual needs and wants. Businesses that do not adapt to changing market needs become unprofitable and eventually will close. The few local developers not willing to face the heat of this economic reality need to get out of the kitchen.

Tax increment financing deals disrupt market efficiency. Here are key issues to consider:

l Schools and roads are legitimate government expenses. Funding private enterprise is not.

l Voters must approve bonds for legitimate public projects, but TIFs for private enterprise are awarded by our City Council without any public approval process.

l TIFs initially were designed to jump start urban renewal and stimulate low-income housing construction. TIFs now are used to build upscale condos and shopping malls. This new use never was intended and has major unintended consequences.

l It’s ideological hypocrisy to praise free markets while an elite few beg City Hall for corporate welfare. TIFs shift business risk to the taxpayers.

l TIFs intertwine government and business in a structure that is neither socialism nor capitalism. This “corporatism” combines the worst qualities of both. TIFs are a quick fix that cause long-term problems in the market,

l TIFs distort the market. It’s unfair to fund one business while leaving competitors with financial disadvantage. Local government has no right to determine winners and losers in the local economy.

l TIFs take (future) money out of the government funding stream, causing either cuts in services or increased taxes. TIFs reduce taxes on wealthy developers as the tax burden is shifted to the middle class.

l TIFs rarely produce the future increase in taxes that are promised in the TIF sales pitch.

l TIFs are not needed for our local economy to grow. There are plenty of investors for smart, profitable business plans. If developers and their bankers won’t fund a project, why should the taxpayers?

l Trying to move businesses from one community to another with competing TIF bribes is a lose-lose game.

l Many TIF projects would have gone ahead anyway; it is impossible to know if the TIF beneficiary’s stated “need” has any validity.

l Businesses locate enterprise in cities for many reasons other than TIFs: available work force, strength of the local economy, schools, transportation infrastructure, communication systems, quality of life.

Considering all the downsides of tax increment financing, why does City Council continue to award TIF tax advantages to a select few developers?

Michael L. Richards of Cedar Rapids, a retired businessman, is a freelance writer and a community activist. Comments: soyawax@aol.com

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