Costs outweigh possible benefits

There are many reasons why further enriching the backers of for-profit, private ventures with taxpayers' money is a really bad idea.

In 2006 I began a blog. Dozens of its essays deal with detailed reasons to oppose tax increment financing.(See 'TIFs: List of Blog Essays,” http://fromdc2iowa.blogspot.com/2014/03/tifs-links-to-blog-essays.html.)

Any one of them is reason enough to reject a TIF. To approve it, proponents need to show why none applies.

The issue is not whether a TIF has a single benefit. Benefit-cost analysis requires we total all the costs and burdens of that TIF and weigh them against its individual benefit.

REASONS TO OPPOSE

Few if any can pass that test.

l Ideological hypocrisy.

How can those supporting free private enterprise, capitalism, and marketplace forces, who think 'government is the problem” and want it 'off their back,” justify taking money from the public collection plate?

l Anti-democratic.

City councils need voters' approval of bonds for legitimate government projects. Yet they can give our money to their friends' private projects on a whim.

l Lowered credit rating

. TIFs can impact credit ratings. Coralville went from a Moody Aaa credit rating, the highest, to a 'lower medium grade” Baa 2 in two years.

l Opportunity costs.

Spending money on one thing costs the lost opportunity to spend it elsewhere. Johnson County Supervisor Rod Sullivan once found a diversion of $700 million of property off the tax rolls. As a result, either we pay more taxes or supervisors cut needed programs.

l Unfairness to neighbors.

The TIF-granting body's neighbors often lose out as well - other communities and school districts with less money in their budgets.

l Unfairness to competitors.

TIFs tilt the playing field. They unfairly upset a free market, punishing honest competitors and benefiting no one except the TIF recipient.

l Risky business.

Money's always available for good deals. If an entrepreneur, family, friends, investors, venture capitalists and banks aren't willing to fund a project, maybe taxpayers shouldn't either.

l TIFs complicate taxes.

We don't deserve more tax complexity and even less transparency.

l 'Money can't buy love.”

Why compete with bribes? A business that needs port access to the Pacific Ocean isn't coming to Iowa. If it did, it would leave for a bigger bribe. Maytag, offered $100 million to stay, left anyway.

l TIFs are unnecessary.

The Corridor is one of the fastest-growing, lowest-unemployment areas of Iowa. We already have what businesses want: skilled labor, transportation and communication infrastructure, quality education, cultural attractions and outdoor recreation.

l TIF granters' poor skills, record.

The subsidy-grantors' record is not great. Elected officials are more skilled at keeping contributors and constituents happy than at evaluating taxpayer-funded business proposals. TIF'ed projects have gone belly up, missed deadlines, and new jobs goals. With reasonable follow-up and transparency, we'd know about many more. But TIFs in Iowa have more lenient provisions, and less oversight, than in most other states.

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'Need” is unknowable. Many projects will go ahead without subsidy. If tax breaks are available, of course developers will say they need them. Maybe this is blackmail. Maybe they need to look harder for funding. There's no way to know.

QUESTIONS TO ASK

At a minimum, here are questions to ask before approving TIFs:

What is this government's past record, when we compare promised results with ultimate return or loss?

Why is this project needed?

Why does that need exceed all conventional needs for public funds?

What will other government units lose? How much more will their taxpayers have to pay?

Of all possible TIF projects, why is this one a top priority?

Who benefits: all citizens, a small segment or primarily the recipient?

How much money is involved?

Why are those who will profit unwilling to invest what is needed? Are their reasons equally applicable to taxpayer funding?

Does the business plan indicate financial success, or reveal risks of failure?

If and when the recipient fails, skips town, goes bankrupt, or misses deadlines, how will taxpayers be protected?

What relationships are there between the potential recipient and the officials approving the funding?

How will the recipient's unfunded private competitors be harmed?

BETTER WAYS TO TIF

TIFs shouldn't be used at all. If used anyway, let's do the wrong thing better:

l Leave the tax code alone. Taxes are taxes, gifts are gifts - through appropriations, fully disclosed and audited.

l Don't privatize profits and socialize losses. It's our money. Don't give it. Loan it or invest it. l

Earn us some interest - with a city or state bank. Invest our tax money; take an ownership share. Give us at least a gambler's chance at occasional profit. Publicize the details.

We don't have a fascist state, just a fascist economy, government and private enterprise blended to more resemble a purée than a stew with identifiable ingredients.

In Washington, D.C., it's billions of tax dollars; in Des Moines, hundreds of millions; in Iowa's cities, TIFs. Without a taxpayer revolt, it's unlikely to change.

l Nicholas Johnson of Iowa City, a former FCC Commissioner, teaches at the University of Iowa College of Law and maintains www.nicholasjohnson.org and http://FromDC2Iowa.blogspot.com