Senate Bill 725_Tax Increment Financing Authorization

[Cathy]

Have you taken a look at SB 725?
Here is the link: http://www.ncga.state.nc.us/html2003/bills/currentversion/ratified/senate/sbil0725.full.html

The Chamber has placed it on the approval list for their state legislative agenda. Some Council members are in favor of this type of financing. This would allow projects to be financed without voter approval. Just declare the area "blighted" and go to work!

You might want to do some reading on the pro's and con's of this type of financing. This may be on the November ballot.

http://www.ibo.nyc.ny.us/iboreports/TIF-Sept2002.pdf
http://www.heartland.org/pdf/80814a.pdf
http://www.pittsburghlive.com/x/search/s_159934.html
http://law.wustl.edu/WULQ/77-3/773-919.pdf
http://www.brookings.edu/es/urban/publications/lucetif.htm
http://www.goodjobsfirst.org/research/ch6tif.pdf
http://www.ibo.nyc.ny.us/iboreports/TIF-Sept2002.pdf
http://www.igpa.uiuc.edu/publications/workingPapers/WP75-TIF.pdf

Cathy

"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." --Thomas Jefferson

[Cathy]

Duluth News Tribune

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Posted on Sun, Jun. 13, 2004



How tax-increment financing works for housing


Say you own a piece of land with a property-tax bill of $1,000 a year. You decide to build 10 townhomes on the land, increasing the annual tax bill to -- let's choose an arbitrary number -- $20,000 a year.

In a TIF district, the city, county and School Board would still collect $1,000 in taxes for up to 25 years, as if the development doesn't exist.

That remaining $19,000 in annual taxes paid will be used to offset the developer's costs of site preparation, roads, utilities and even relocating existing tenants, if there are any. Once the district expires, all the tax money goes to the city, county and school district.

The goal is to bring down project costs and make each unit more affordable. Often, the affordable units are blended with market-rate units that are more lucrative for the developer.


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© 2004 Duluth News Tribune and wire service sources. All Rights Reserved.
http://www.duluthsuperior.com

[StanN]

IN the right hands and under the right circumstances TIF's are a useful tool. But in the hands of a CTC that has politicized the budget beyond belief -Cary is the wrong place and the present regime is the wrong "hands". The CTC has a long way to go to earn my trust that they can manage my tax dollars responsibly. I do not support TIF's for Cary.

stan

[Cathy]

Local Government,Opinion
No. 767: Amendment One Is Still a Bad Idea

By Chad Adams
July 14, 2004

They’re back. They’re chirping for joy. And they just need to die. No, it’s not only the 17-year cicadas I’m talking about.

Every 11 years (1982, 1993, and one hopes in 2004), the voting public has decided to defeat legislative measures calling for tax-increment financing. TIFs are simply another way to raise government debt without specific voter approval.

The premise here is that local governments (cities or counties) declare a certain area as a tax district. They sell bonds to provide tax-supported projects to benefit one or more developers in the district. These bonds are sold just like general-obligation bonds, except for the fact that the voting public would not have the right to vote on them. Supposedly, the difference between what the property tax value was before the improvements and its value after the improvements would be the “increment.” In theory, the additional tax revenue is used to pay back the bonds.

The folks wanting this policy change realize that you probably won’t support anything with the word “tax” in it, so they conveniently changed the name to “self-financed bonds.” However, since that term has apparently proved confusing or suspicious, you will now hear growing support for “Amendment One." This sounds innocent. But in all honesty, if they have to change the name twice, it’s probably still a bad idea.

Why do we need TIFs in North Carolina? TIFs are hailed as a desperately needed (revenue) tool for local government because 48 other states have them. Now, were it up to me, I would rather tout that other states, including our neighbors, have lower corporate and individual income taxes and that we should emulate those policies. A recently released study by Iowa State University researched the period between 1989 and 1999 and found that “TIF-increment spending at the county level has not yielded measurable and distinct fiscal, economic or social outcomes.” Iowa State researcher David Swensen said that “there is virtually no evidence of broad economic or social benefits in light of the costs.”

Case in point: Duluth, Minn. In June, the home county of Duluth accused the city of being “addicted to TIFs.” Businesses now won’t come to town unless they get the benefit of TIFs, and growing public-service needs are not funded because all the tax growth is paying for TIF debt.

With TIFs, you are co-mingling the success of one or more companies with paying back taxpayer debt. What it means is that if the companies that benefit from TIFs go under, the local government is still responsible for the bond payment.

Beyond this, there is the matter of making private property tax value a matter of public need. What we say, in essence, is that the government should do things to increase the value of private property. This brings us one step closer to taking property away from private citizens for the purpose of development because it will be worth more to the local government in taxes. Before you think this is laughable, the Connecticut Supreme Court has ruled that using eminent domain is appropriate to do just that. We should not erase the line between public and private action, even with good intentions, because the results will certainly not be good for free enterprise or for good government.

The National Federation of Independent Businesses, a small-business organization, and countless other organizations have shown that small businesses create more than 80 percent of all new jobs in North Carolina. Yet we unfairly tax and punish their efforts by giving away their tax money to subsidize big industries whose failures can be crippling, and whose successes are not as predictable as economic development staffs would contend.

The real goal of government should be to create an environment where small businesses flourish and large businesses are welcome. We should say to all business owners, “We’ll never tax you to pay someone else to bring a company here to compete with you for land, labor, capital, or customers.”

From the local to the state level we should be looking at regulations and taxes that are obstacles preventing North Carolina from being competitive. We should focus on ways to lessen the burden of government. We should aspire to be the best state in which to start a business, large or small. Tax-increment financing, self-financing bonds, Amendment One — by any name, it still smells as sour.

[StanN]

If you believe in "sel-financing bonds" you would also believe in "free money"....and I have got a bridge in my home town that I can sell you for a song.

stan

[Don]

Great article Cathy. Thanks for posting it.

[Cathy]

If you believe in "sel-financing bonds" you would also believe in "free money"....and I have got a bridge in my home town that I can sell you for a song.

stan

Exactly!! GREAT POINT!

Something else to consider with this type of financing, is that it is a "zero sum game" for the areas under TIF when "everyone else is doing it".

Cathy

[Cathy]

North Carolina League of Municipalities
http://www.nclm.org/default.asp

"The League, the Association of County Commissioners, NCCBI, and many other partners have launched a statewide campaign to educate voters on self-financing bonds and to win voter approval for Amendment One on Nov. 2."

Join the Amendment One campaign!
http://www.nclm.org/A1%20Center%20Page%20News/amendmentone.htm
Quote from an educational flyer provided at the League website:

Does approval of individual self-funding bond projects require a vote?

No. the law requires a vote only if the taxing power of the community is pledged to pay off bonds. The law clearly states that communities will not be pledging their taxing power to pay off these bonds. Also, the bonds are used to support projects that are ready to start now and can't wait around months for a referendum. In addition, self-financing bonds can be insured. Also, local governments can put a lien or foreclosure on private development to collect the taxes owed.

What were you saying about that bridge you had for sale, Stan??

So...let's see now,___ the politicians and planners can try to pre-determine what the market will support; (kind of like the sports venues they gamble on); completely design an entire area; bypass the tax paying citizens for financing; lure some builders into the scheme with "free money"; and then when it fails, and fails to produce a tax increase to pay the debt, they seize the property that was a failure, and the taxpayers end up holding a white elephant untill they can find some sucker in the private sector to take it off their hands???

Hmmmmm...seems familiar...

And if there IS a tax revenue increase from the development, doesn't that revenue become "the taxing power of the community"??
Cathy

[Cathy]

Use this link to take a look at the letter that was sent to YOUR municipal officials to help them "educate" you about Amendment One!

Get ready for an 'educational' deluge of propaganda between now and November!!

http://www.nclm.org/A120Center20Page20News/amendmentone_letter.pdf

[Cathy]

http://www.redevelopment.com/norby/ch09-ia.gif

[Cathy]

The National Education Association released a report on how "self financing bonds" harms schools across the US.
"The researchers looked at abatements, TIF, and school finances in all 50 states and the District of Columbia (hereafter included in the count of “states”) by researching statutes, news reports, and other studies and by interviewing the leaders and staff of state school board associations, tax departments, and development agencies."

The full report is at this link:
http://www.goodjobsfirst.org/pdf/edu.pdf

Protecting Public Education From Tax Giveaways to Corporations

Property Tax Abatements, Tax Increment Financing, and Funding for Schools

NEA Research commissioned this study by Good
Jobs First, a project of the Institute for Taxation
and Economic Policy. Like these nonprofit, nonpartisan
research groups, the NEA has been concerned for
some time about state fiscal policies and has sought to
advise states on ways to protect and enhance funding for
quality education. NEA Research has long maintained
that quality education requires comprehensive and well coordinated
tax and economic policies at state and local
levels. An equitable and adequate funding system for public
education can hardly flourish when state and local tax
structures become more regressive and fall into serious
deficit; school systems cannot function effectively when
revenues earmarked for modernizing school buildings are
instead diverted to corporate property tax abatements and
other subsidies.

[johnb]

Those bonds are trouble for fiscally irresponsible munincipalities.

Imagine a city with a low bond rating and a council with insatiable appetites for "wants". Would the state allow a munincipality to default on it's bonds? Aren't these bonds typically a higher interest bond than what Cary normally gets? With the economy improving it's not so much an issue, but while times are good it's not hard to imagine munincipalities cashing in again behaving as if the gravy train is here to stay. The next economic downturn however will hit the irresponsible muni's that would use these bonds all the harder.

Bad idea. Real bad idea. Just like lottery tickets, something bought in bulk only by stupid people.

[Anonymous]

Visit http://www.noamendmentone.org for the other side of the story

[Anonymous]

Gosh Golly...
I am sorry I am outta touch with this but...
from what you guys have posted, munis will be allowed to use bonds to finance projects without voter approval right???

I have gotta be missing something here. Does someone have arguments for the other side (better than what's been given)?

If not, GULP, I would have to agree with John B. and Cathy.

The only drawback I can see is...
If a muni is hellbent on doing a project (let's see... Cary doesn't have a public golf course yet :lol: ) and they don't want voter approval then they can finance it without bonds which would be more expensive.

... Hoping you guys can give me more information.

Thanks,
HW

[Wuptdo]

Guest,

Look over the 12 August issue of the Cary News. In the "Letter to the Editor" section, there are several well written letters about TIFs.

Enjoy.

Wuptdo B-)

[Cathy]

Gosh Golly...
I am sorry I am outta touch with this but...
from what you guys have posted, munis will be allowed to use bonds to finance projects without voter approval right???

I have gotta be missing something here. Does someone have arguments for the other side (better than what's been given)?

If not, GULP, I would have to agree with John B. and Cathy.

The only drawback I can see is...
If a muni is hellbent on doing a project (let's see... Cary doesn't have a public golf course yet :lol: ) and they don't want voter approval then they can finance it without bonds which would be more expensive.

... Hoping you guys can give me more information.

Thanks,
HW

Harold,
I have searched the interent for information of TIF's and how they've worked out for States that approved their use years ago. Lot's of "Government sponsored" sites that are pretty much handing out all the feel good, "ain't this wonderful?" propaganda. Lot's of States are pushing for amendments to fix the problems that they have encountered with TIF abuse. They haven't succeeded yet in making it better.

Many articles and policy analysis' showing how the TIF idea has bad side effects and little positive results. Some show negative results in the growth department.
Check the School of Government Legislative overview of 2003 and see what they say about TIF.
http://ncinfo.iog.unc.edu/pubs/nclegis/nclegis2003/pdfs/CH14web.pdf
And do read up on it at http://www.noamendmentone.org/

[Cathy]

I found it very interesting to see that the General Statutes have already been changed online to include the section that allows Tax Increment Financing to be exempt from voter approval.

They just added some notations that the changes would take effect at a later date. Some of our politicians must be pretty confident that the voters will approve this for them.

Cathy

[johnb]

They're betting on the stupidity of their constituents. Their bet is probably quite safe. Those constituents did elect them.

[kellyc]

Those bonds are trouble for fiscally irresponsible munincipalities.

Imagine a city with a low bond rating and a council with insatiable appetites for "wants". Would the state allow a munincipality to default on it's bonds? Aren't these bonds typically a higher interest bond than what Cary normally gets? With the economy improving it's not so much an issue, but while times are good it's not hard to imagine munincipalities cashing in again behaving as if the gravy train is here to stay. The next economic downturn however will hit the irresponsible muni's that would use these bonds all the harder.


John I have been told that no one has ever defaulted on their bonds...I think this is a horrible idea too. What happens if some little town in the mountains defaults on their bonds? Does the rest of the state's taxpayers pick up the check?

Kelly

[Wuptdo]

Kelly,

Look no futher than Person County (about 30 miles from Cary). They are having trouble just paying their little school bonds. It is small towns like Roxboro and Goldsboro that worry me.

I have a very simple idea to help out all these "poor" counties in N.C.
Combined into larger regional counties. Of course, what most of you city folk don't know is that in rural N.C., the county's are run like serfdoms. By that, I mean by that are several large "interbred" families control most of the land (and the taxbase) and therefore control the local government, ususually through the local Sheriff's office. In many cases, it has been that way since reconstruction (that's after the war of Southern Independence for you Yankee's.) :cry:

No this is a bad idea and needs to be stopped! :twisted:

Whom do you trust? :wink:

Wuptdo B-)

[kellyc]

I have no doubt that many counties are run that way. I suspect many cities are run that way too. There is a lot of corruption that can/often does come with power. I agree that this needs to be stopped. I cant help but wonder how much information is being sent out to some of these poorer counties about this amendment. This is a huge election year, and I imagine education will be the key to the success/failure of this. It will definitely be intresting to see the breakout of the elections by precinct/district for sure.

[johnb]

It is a very dangerous situation. Poor counties / munincipalities may very think the gravy train has just arrived at their station. I have no problem allowing a particular jurisdiction suffer the consequences of electing chuckleheads to political office. Everyone should be afflicted with the politicians they suffer to put in office. However, it becomes an issue for others if those jurisidictions look to the state to bail them out down the road. This amendment looks like the express lane to insolvency.

[Wuptdo]

Also, there is something else about this bill that is nagging at me. It is like that nat that keeps coming close to your ear, but your not fast enough to swat it. Maybe it is nothing, but something about this bill being a backdoor to bailing out the 4 to 5 billion dollar debt incurred by rural electrical co-ops. Maybe way off base but.......

Wuptdo B-)

23 to go!

[johnb]

John I have been told that no one has ever defaulted on their bonds...I think this is a horrible idea too. What happens if some little town in the mountains defaults on their bonds? Does the rest of the state's taxpayers pick up the check?

Good questions Kelly. None have to my knowledge either, yet. However, the danger is there. NYC, Cleveland, and Orange County California all had bond problems If memory serves me correctly back in the 1970s NYC did default. All had to be bailed out by others and I assume there have been smaller governmental units in other places of this nation so troubled. I have no problem allowing NYC or whatever jurisdiction commiting economic suicide. They, however, have NO RIGHT to incinerate their own munincipal finances and hand the bill off to others for cleanup. That's just not "fair".

[Cathy]

View the actual text of the Bill: http://tinyurl.com/5bqmo

Pay close attention to these quotes, that is if you wish to read the entire Bill.

"if the project does not earn enough to repay the bond, the taxpayer will have to pay"
or
"the taxpayers property taxes will increase if the project does not provide the expected revenues to repay the bond."

http://www.noamendmentone.org/