Another reason to scrutinize TIF

By The Gazette Editorial Board

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Johnson County supervisors have come up with a “creative” way to access some of the tax money locked in tax increment financing districts and lower the burden on other taxpayers: by borrowing more.

It's a new twist in the sometimes-contentious debate over the use of TIF, an economic development tool that allows local governments to capture property tax revenue increases from improvements within designated districts to help fund those districts' development. It also is another example of the need to better understand the impact of TIF use in our state.

Proponents say TIF use generates growth that eventually will benefit all tax-collecting bodies in a region.

But critics say aggressive use of TIF places a heavy burden on other tax-collecting entities - such as school districts and counties - that lose out on new tax revenues captured by the TIF.

Johnson County officials estimate county government is missing out on $4.5 million in annual tax revenues from TIF districts in nine municipalities including Coralville, known statewide for its extensive use of TIF.

The current draft of next fiscal year's budget calls for the county to bond for $9.9 million - nearly double its usual amount - including $6.5 million for insurance and $559,000 for technology expenses. State law allows government to collect debt service from the increment, and borrowing for those operational expenses would net the county an additional $1 million from TIF districts, says county Treasurer Tom Kriz.

Because the $7 million is money the county would budget for anyway, bonding would not increase county taxes paid by property owners in TIF districts (and would be paid off in 90 days). Taxpayers outside the district would pay less.

Coralville Finance Director Tony Roetlin estimates such a move would cost the city about $82,200 in TIF revenues but said he wouldn't be critical of Johnson County for the extra bonding.

“That's completely within their rights to do,” he told us. “We in Coralville don't view that as a major issue.”

Maybe not, but it seems to us a convoluted way to do the people's business.

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