TAX INCREMENTAL FINANCING IS A RECIPE FOR ABUSE

THE LEGISLATURE SHOULD FIX THE COMPLEX PROCESS THAT BENEFITS DEVELOPERS AND POLITICIANS AT THE EXPENSE OF TAXPAYERS

By RICHARD ESENBERG for the Spring Issue of Diggings

Tax incremental financing might seem to be a dry and technical subject. The details are real green-eyeshade stuff. But their impact on the political process teaches us a tantalizing lesson: Tax incremental financing is an occasion of sin.

There are two problems — one related to the obscure and difficult to understand nature of tax incremental districts (TIDs) and the other related to the simple way in which politicians can sell them. In other words, what we can’t see is critical and what we do see can be misleading.

Let’s start with the fuzzy stuff. The idea behind tax incremental financing (TIF) is that a subsidy to a developer is necessary to cause the development to happen. Because the subsidy is “paid for” from the taxes levied on new development that would not otherwise occur, the creation of a TID is supposedly a win-win. But determining whether the conditions for the creation of a TID and whether the subsidized development would not otherwise occur is a complicated inquiry.

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