To TIF or not to TIF

By Stephen Tuttle | Dec. 1, 2016

Traverse City’s Downtown Development Authority wants to renew an expired tax increment financing plan covering the Old Town district.

The previous TIF in that district lasted 30 years and expired in 2015. The DDA would like a new TIF for another 25 years.

The DDA is especially interested because it would capture a lot of property tax revenue — money that goes to the city, county, Northwestern Michigan College and the local school district. As property values increase, TIF allows the DDA to collect that increased tax revenue for the next 25 years. It’s used for various infrastructure improvements and economic development purposes. (K-12 public education is exempt; the DDA captures no money intended for those schools.)

Among the dozen projects proposed by the DDA are a parking deck on State Street and improvements in the Union Street dam. The DDA’s argument is it has successfully completed many projects with TIF revenue previously — the Sarah Hardy and Eighth Street parking decks, the Boardman River walkway, infrastructure improvements to West Front Street and the Warehouse District, among others — and a renewal of the Old Town TIF would allow it to continue.

Downtown Development Authorities were established by law in the 1970s to help revitalize then-ailing downtowns. Having accomplished that, at least in Traverse City, their reach has since expanded.

The latest proposal does raise some obvious questions.

For example, why can’t the city and county use the tax money being captured themselves and work on the very same projects? Is the city incapable of undertaking these projects? Are there other projects that could be completed if Traverse City had the extra tax revenue that gets captured by the DDA?

Somebody needs to explain to us why the DDA is a better option for spending tax dollars than the city, county and NMC, all of which lose some revenue in a TIF district.

There is also a counterargument. Revenues for the city, county and NMC remain flat in a TIF district though expenses of all three significantly increase. Does that strain budgets, weaken general fund balances and force decisions that wouldn’t otherwise have to be made?

The Traverse City City Commission will discuss the issue with the public on Dec. 19. All property owners in the proposed TIF district will be notified and encouraged to attend the commission meeting. Of course, their tax bill will remain the same regardless of whether a TIF district is approved or not.

It might be better to ask someone who lives in Kingsley, sends children to school in Kingsley, does day-to-day shopping in Kingsley, and works outside of Traverse City how he or she feels about tax money the county could use locally being diverted to Old Town Traverse City.

In fact, it’s reasonable to wonder why the county would support such an idea at all. Officials have claimed their budgetary sky is falling for a very long time, and here’s a proposal that takes some of their revenues for Traverse City-specific projects.

Surely representatives of the county will be in attendance Dec. 19 to oppose another TIF district and to yet again cry poverty and explain how they need every penny of their tax revenues. Or perhaps they will show up to explain why they favor a renewed TIF and how it helps their non-Traverse City constituents.

Likewise NMC, which took 19 months to sign a contract with its new teachers’ union, will surely be there to insist it also receives its full share of tax revenues, or to explain how losing that revenue helps the college, the faculty and the student body.

It is entirely possible that a renewal of a TIF district and the accompanying DDA tax capture represents the best utilization of that revenue. Or maybe the city and county should consider how they could better utilize those same tax dollars if they were filtering into their coffers.

Either way, holding a single city commission meeting on the subject and voting immediately seems a trifle quick.
This is a decision that will ultimately divert many millions of dollars over a quarter century time span — a generational commitment. The city commissioners will be making a promise that will extend well beyond their tenures in office.

Considering the money involved and the length of the commitment, the decision merits more consideration than a couple hours of public comment and a vote. What’s the rush?

At the very least, it merits a more satisfying explanation as to why this is the best utilization of tax dollars and why the city, county and NMC couldn’t do just as much themselves.