City View: TIF projects are worthy investments in Columbia’s future

At a recent meeting of the Chamber of Commerce Government Affairs Committee, I had the opportunity to sit in on an excellent discussion about the two proposed downtown projects seeking Tax Increment Financing (TIF) assistance. (Full Disclosure – I am and have been a member of that committee for years.)

Fred Demarco, John Ott and Nathan Odle did a good job of bringing up the pros and cons of TIFs in general in regard to and these projects specifically.

I came away from the discussion with several conclusions.

1. TIF is a complicated process. (Just look at an excerpt of the fact sheet on this page.) For instance, “blight” according to state statutes has a different legal meaning than what many would think.
2. For every point about fairness, another point can be made about its unfairness. We all need to make the best use of the tools we have now to solve current problems. We also need to realize that the rules of the game change often in life and that the tools will change and evolve accordingly. I personally think that if both sides of an issue come away slightly disappointed, then we’ve probably taken a balanced approach.
3. Whether TIF takes funds away from our schools and other taxing jurisdictions depends on one’s perspective. Whether you believe these projects will happen or not without assistance, you can create credible scenarios where the schools potentially loose or gain resources with TIF. My crystal ball is cloudy about what is likely to happen in these two locations if the proposed projects don’t go forward. While it is crazy to think nothing ever would happen, the projects would probably not be of this scale.
4. Perhaps the most basic question is, “What is the role of local government in downtown development?” It seems that most folks would strongly support both projects if no assistance was required. Some feel that downtown is doing just fine. Others point to the declining downtown sales tax and business licenses and the increasing acquisition of property by non-tax paying entities as a need to do something different. I believe if you step back and look at what’s happening downtown, the trends are disturbing.

It is the last point that, in my mind, tips the scales toward action. I believe that downtown is the heart and soul of Columbia. Surrounded by the tri-campus area, downtown is the geographic, social, cultural and historic center of our evolving community. Downtown provides our community’s sense of place. It has always been where we come together to honor the past, celebrate the present and welcome the future.

During the community’s vision process, volunteers representing a cross-section of our city spent months formulating a vision that “Downtown is a hip and vibrant district with a diversity of easily accessible businesses, residences, attractions and institutions; it is an exciting gathering place for all types of people.” (Final Vision Report, Jan. 2, 2008, pg. 50) If we are to achieve that vision, I don’t think we can continue to do what we’ve always done.

I’m not happy with maintaining the status quo. The Sasaki Plan, the Downtown Citizen Topic Group’s Vision Plan and the Downtown Leadership Council Report got it right about the need to promote “catalytic” projects and provide incentives for private investment in our downtown.

During my State of the City report last month, I said Columbia is a community that prefers progress to retrenching. I quoted President Harry S Truman, who said, “I don’t believe in little plans. I believe in plans big enough to meet a situation which we can’t possibly foresee now.”

While I don’t have a crystal ball, I do believe that the proposed TIF projects represent visionary ideas that will help ensure the continued viability of our downtown. I believe we should support these efforts and, as best we can, make it easier for those who are willing to invest in our community.

What is Tax Increment Financing?

Tax increment financing (TIF) is a tool allowed by state lawmakers more than 20 years ago to help local governments jump-start economically sluggish parts of their communities and revitalize areas at risk of becoming “run-down.” The Columbia City Council decides which development proposals are eligible for TIF, based on the recommendations of a TIF Commission, a public body.

Why target downtown?

The growth rate of downtown business licenses has not kept up with other parts of the city.

Many downtown businesses have moved out of the area.

Downtown sales are declining.

Much downtown property has converted to tax-exempt status or surface parking.

How does TIF work?

The key is the amount of new tax revenue generated by the project because of higher property values, additional sales and other economic activity. TIF does not impose new taxes.

A tax increment is the difference between the amount of tax revenue currently generated and the amount of tax revenue generated by a completed project, due to higher assessed valuation and taxes associated with increased economic activity (i.e., sales taxes).

A TIF designation does not reduce property tax revenues available to taxing jurisdictions. Property tax collected on properties included in the TIF-financed project at the time of its designation continue to be distributed to the taxing bodies.