Last week on this page, we devoted this space to reprinting a June 4 discussion among Sarasota County and Sarasota city commissioners on whether the county should funnel more money to Newtown than the $29 million Newtown will receive over the next five years from tax-increment financing.
City commissioners wanted more money. But county Commissioners Jon Thaxton, Shannon Staub and Nora Patterson rightfully said they already have difficulty justifying the existing TIF setup. Capturing one of the fatal flaws of tax-increment financing, Patterson said:
“I have a problem with the principles of CRAs (Community Redevelopment Areas). It’s a shell game, and what it ends up being is a long-term commitment of a particular area of a revenue source that would otherwise be used in the entire county.”
A “shell game.” Actually, it’s worse than that.
“Tax-increment financing” and “community redevelopment areas” are the nomenclatures for a system that works as follows: Government authorities designate “TIF” zones or, in most cases, blighted areas they want to see redeveloped. They can help spur the redevelopment by committing any future increases in property taxes (above the base year of property taxes, thus “incremental”) to be used in the TIF/blighted district over a designated period, often 20 to 25 years.
For instance, Building A is taxed in 2009 at $20,000. In 2010, the value of the building rises 5%, increasing the tax from $20,000 to $21,000. That additional $1,000 in taxation — rather than go to general services such as police, fire and schools — would be funneled into a TIF or CRA account, whose funds would be used for improvements in the TIF district.
This sounds and appears as though it makes a lot of sense. But like most government actions intended to fix a problem, tax-increment financing is yet another program tha benefits a few at the expense of the many.
Proponents of TIF districts say the incremental tax dollars that go into improving only a specific TIF district are in fact investments that help an entire community. For instance, in the case of Newtown, which falls in a TIF district that includes downtown Sarasota, TIF proponents say that funneling that $29 million in incremental property-tax money into Newtown over the next five years will help turn a downtrodden, underutilized area into a more valuable asset for the city and county.
And indeed, perhaps those funds just might do that. But at whose expense and at what cost? As we often quote in the words of the late Milton Friedman, the Nobel economist: What you give to one you must take away from another.
For starters, including Newtown in the downtown TIF district deprives — or takes from — the downtown properties whose values are rising faster than those in Newtown the use of funds that their properties have generated. Beyond that, earmarking the incremental increase in property taxes for Newtown deprives all Sarasota city and county taxpayers the use of those funds. This in turn shifts a higher burden on taxpayers city- and countywide. Giving to one takes away from another.
None of this is “fair.” Whenever government adopts a subsidy — and this is what TIF is — someone always receives an unearned benefit.
Indeed, if the city and county commissioners wanted to be fair to all of their constituents, they would eliminate all TIFs and CRAs.
How then would blighted areas ever be revitalized?
There’s not enough space left to prescribe a detailed answer to that. Nonetheless, there are some obvious steps and choices:
Change for the better doesn’t occur until the pain is so great that it causes you or a group to take personal action to stop what’s causing the pain and alter behavior. Help won’t take root until you first help yourself.
Crime won’t go away until the punishments are harsh. Investment won’t occur unless the market is stable and the risk-reward ratio makes economic sense.
If Sarasota Commissioner Fredd Atkins wants to see his Newtown redeveloped, he should start with the residents and taxpayers in his own neighborhood and quit asking for more handouts.
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