Tiff over TIFs

Spectator

By Stephen Tuttle | Oct. 5, 2024

The voting has begun and, if you’d like to ignore the blizzard of nonsensical and accusatory campaign advertisements—hey, already voted, quit sending me your crap—the next month is little more than something to be endured or muted or thrown away.

Others, hardier souls all, are still deciding when or if they’re going to vote. If you’re a resident of Traverse City, it means you’ll be confronted with the TIF ballot questions. It’s a little confusing since a “Yes” vote would end TIF 97 in 2027 and a “No” vote would extend it decades longer. Secondly, if you’d like a say in future TIF proposals you vote “Yes,” and if you’d like that to be left up to others you vote “No.”

TIF is tax increment financing, and it was first used way back in 1952 in California. The idea was to give cities another tool to fight urban blight, including the cleanup of polluted sites, so cities could once again grow and prosper. A TIF works like this: an area is designated as a TIF district with the approval of those businesses and homeowners within it. At that point, baseline property taxes are established, and that money goes to the community’s general fund annually. As the property’s value increases, the taxes above the baseline are “captured” by, in Traverse City, the Downtown Development Authority (DDA).

Traverse City first created a DDA in 1979, a time when things weren’t great in downtown. It was not a shuttered, dystopian wasteland as some would have us believe, but it was in need of help. Traverse City and the DDA then created a downtown TIF district in 1997 known as TIF 97. It should be noted this was not without significant controversy, and those supporting TIF 97 at the time promised it would not be extended when it expired in 2027.

It isn’t just the Traverse City general fund that loses income here. Property tax revenues intended for Northwestern Michigan College (NMC), Grand Traverse County, the Bay Area Transportation Authority (BATA), TART, and the Traverse Area District Library all have money captured by the DDA’s TIF district.

It’s not as if the DDA has wasted or abused the millions they’ve captured; they’ve done commendable work on many fronts, and downtown’s current vitality is a credit to at least some of the work they’ve done. Traverse City voters will now decide if TIF 97 should be extended another 30 years and whether or not they should be able to vote on any future proposed TIF districts.

There have been some troubling aspects to this campaign. Whatever you might have heard, property tax revenue both within and outside the TIF 97 district will continue to flow. Downtown will get a bit less as the other entities will have their shares flowing into their budgets, as well.

Additionally, we’ve been told taxpayers will have to pay more for “needed” and “critical” projects, though information on which projects and why they would suddenly cost more is not information that has been forthcoming. There is a conceit to the notion that only projects downtown are somehow worthy of funding; retrenchment of those potential projects is hardly the end of the world. Some things might take a little longer or need to cost a little less, or just maybe there are projects waiting in other neighborhoods which now have some available funding.

The idea that taxes will be raised is a little silly. Traverse City’s Commissioners are elected politicians not anxious to run on an “I raised your taxes” platform. Important work will get done with or without TIF, and without a tax increase.

If TIFs are as critical as we’ve been told, then surely its advocates would have little trouble successfully putting new TIF districts to a public vote. It is entirely possible neighborhoods that have not benefited from a previous TIF may want to create a district for housing or development in a forgotten corner, and they will be willing to convince the rest of Traverse City to support their plans.

There’s also been the suggestion that approval of these ballot issues will result in lawsuits. (The ballot proposal requiring a public vote on all TIF plans violates state law in both its content and its length, according to an opinion from the state attorney general’s office.) But it is not clear why a lawsuit would be an inevitable outcome. The City Commission is not going to invite litigation by approving TIF-dependent projects that cannot be completed without an extension of TIF 97 if voters choose to end that program. (Truth is, the city will probably get sued no matter what.)

Finally, TIF advocates have not adequately explained why it is necessary to betray the promises made to voters in 1997 that TIF 97 would not be extended. No crisis exists that would reasonably undo that pledge.