Tag: Tax increment financing

Randal O’Toole in front of WaterWalk Place in Wichita, a monument to the failure of TIF districts, eminent domain, and urban planning by government.

Last week Cato Institute Senior Fellow Randal O’Toole was in Wichita. He delivered a public lecture Thursday evening to a crowd that braved poor weather to attend.

O’Toole said he spent 15 years studying urban planning, and he said he’s learned this: “Urban planners promise us paradise on earth, but first we have to give them the power to create it.”

Imagine an urban planner in 1950 writing a 50-year plan for Wichita. O’Toole showed illustrations of some things we take for granted today but were unknown at that time, such as direct dialing a long-distance telephone call, using a personal computer, and flying on a commercial jet aircraft. But, he said, nearly everyone had rode on trains.

We know that predictions made in the past often turn out to be nowhere near accurate. But urban planners still make these type of long-range plans. The problem, O’Toole said, is that when plans are made, someone is going to benefit from that plan. Those people will lobby to keep the plan in effect so that they continue to benefit. This will be true even if the plan turns out to be totally wrong and a disaster for everyone else.

Cities are too complicated to plan, O’Toole said. There are too many people, and there are too many parcels of land with too many possible uses. Despite this complexity, planners think they should be allowed to dictate the use for each parcel of land.

Since planning is so complicated, planners follow fads. As an example, O’Toole showed an example of a city that created a pedestrian mall downtown, as did some 200 cities across the country. Almost all have since been reopened to traffic.

Another fad was slum clearance, where high-rise housing projects were built to replace slums. These buildings proved to be unlivable, and many have been torn down.

One of the latest fads is “smart growth,” which seeks to increase the density of urban development. O’Toole’s hometown of Portland has embraced this fad. There, an urban growth boundary limits the expansion of developed areas. Instead of growing out, planners want the city to grow up. Minimum density zoning means that high-density housing replaces single family housing.

Row houses in Portland. These replaced a single-family home.

O’Toole showed a photograph of a nice house that he said sells for $160,000 in Houston. In Portland, at the peak of the bubble, a similar house would sell for $380,000. He said that Portland planners are proud of the fact that developers will buy a house on a quarter-acre lot, tear it down, and replace it with four skinny row houses.

Could this happen in Kansas, he asked? O’Toole said that President Obama’s Secretary of Transportation has decided to require all metropolitan areas to write plans to include compact development.

Light rail is another favorite tool of urban planners that hasn’t worked. O’Toole told how Portland built light rail rather than highways. Federal dollars encouraged this. But light rail was so expensive that Portland had to cut back on its thriving bus service. Bus fares were raised and service was cut, so bus ridership plummeted.

A light rail train in front of an apartment building in Moscow …
… and the same in Portland.

Portland built still more light rail, however, urged on by campaign contributions from rail contractors. Land near the light rail stations was zoned for high-density development. But no one wanted to develop there, because there was a surplus of high-density development and no parking around these light rail stations — except for train riders, and few people rode the trains. So Portland subsidized high-density development along light rail lines.

Portland also created tax increment financing (or TIF districts) along the light rail lines. O’Toole referred to the money allocated to TIF districts as stolen from police and fire services, and from public schools. But still more TIF districts were created along even more light rail train lines.

Cars parked illegally at a high-density, transit-friendly development in Portland. Management knows that if parking regulations are enforced, tenants will leave.

The claim by government officials is that light rail promotes economic development. But it’s a zero-sum game, O’Toole said. Development is promoted in one place at the expense of development elsewhere. The added tax burden of TIF makes it a negative-sum game, as the cost of TIF financing slows the economic growth of cities that use TIF compared to those that don’t.

O’Toole showed a photograph of a mixed-use development in Portland with three floors of apartments upstairs, with shops on the bottom floor. But all the stores are empty, because there is no parking for shoppers.

All the spending on light rail in Portland has led to a decrease in the share of commuting trips taken using transit, O’Toole said.

So what is the result of following urban planning fads in Portland? O’Toole said: “If your goal is to make housing unaffordable, make your streets more congested, increase taxes or reduce the quality of urban services, then by all means follow the kind of fads that Portland is doing.”

O’Toole said that cities should follow the type of planning efforts that Anaheim, California has followed in the Platinum Triangle. Instead of using TIF financing to sell bonds and take land by eminent domain, cities should not rely on eminent domain and subsidy. Government should get out of the way, he said.

Randal O’Toole’s appearance on the KPTS Television public affairs program Kansas Week may be viewed at Urban planning discussed on Kansas Week.