Remarks to be delivered to the Wichita school board on August 25, 2008.
On August 5, 2008, the Wichita City Council greatly expanded an existing tax increment financing district. This board has 30 days from then to veto the city’s action. I want to explain why this board should do just that.
The arithmetic behind TIF districts is simple. The city borrows money and spends it on things that the developers need to make their project work financially. Then, as property values in the district rise, the new additional property tax revenue is used to pay back the city.
Often it is said that what the city spends the TIF money on is infrastructure, the types of things that cities do routinely. But when developers working outside of TIF districts need things like streets, turn lanes, sewers, water supply lines, street lights, landscaping, and new traffic lights, the developers either pay for these things themselves, or the city builds them and assesses special taxes against the property to pay for these items.
So while a TIF district doesn’t let developers escape paying increased property taxes, it lets them keep these increased taxes within the TIF district for their own benefit. In non-TIF developments, the new taxes are available for the funding of general government, including USD 259. John Todd will talk about the magnitude of these numbers, but in the case of the expansion of the Center City South Redevelopment District, the numbers are large. Very large.
It is often said that taxing districts like USD 259 aren’t really giving up anything when they agree to the formation of a TIF district. We’re told by developers and politicians that without the benefit of the TIF district there won’t be any new development. But the reality is usually different. As recently reported in the Wichita Eagle, rarely is the choice between all or nothing. The choice between development in a TIF district or nothing is usually false.
Also, TIF districts are harmful to the overall community and tax base. Economists tell us that cities that use TIF grow slower than cities that don’t, and that there is no evidence of broad economic or social benefits in light of the costs.
Just a year ago this board raised the property tax rate. Presently the community is being asked to increase tax rates further by investing in a bond issue. When the City of Wichita allows property to escape the tax rolls and this board agrees with that action, it places an even higher burden on those residents and businesses that can’t take advantage of TIF districts. Plus, it gives up a stream of tax revenue. That’s why this board should veto the creation of this, and other, TIF districts.