Remarks to Wichita City Council, August 5, 2008.
When I’ve been talking to people in Wichita, I find there is great confusion about the way that TIF districts work. This confusion serves to obfuscate what really happens with TIF districts: the TIF developers get to use their own property taxes to pay for things that non-TIF developers have to pay for out-of-pocket, or through special tax assessments on top of their regular property taxes.
It is really this simple. To deny this is to deny simple arithmetic.
Then, do TIF districts perform as promised? One of the troubling things I learned from recent Wichita Eagle reporting is that in the past four years, assessed valuations in the downtown TIF areas have grown at 14.9 percent per year, just 1.4 times the rate of all commercial property. A few weeks ago I was assured by one council member that the taxes paid by property owners in TIF districts grows “exponentially.” But now we have evidence that the growth is quite modest.
I was going to say that I have no doubt that the members of this council have good and noble intentions in wanting downtown Wichita and the area around the arena to succeed. But establishing this TIF district is not good for the arena district or the city as a whole.
Entrepreneurs in Wichita, or anywhere for that matter, have a difficult enough job to do in predicting what consumers want. For government to step in and create special tax-favored districts adds another measure of uncertainty and risk. It distorts the market allocation of capital. Investment will be driven by government incentives rather than market considerations.
This is also a blow to those who have invested elsewhere. It is the city telling them they made a mistake, that they invested in the wrong part of town.
For the arena district to succeed, it needs to be because entrepreneurs, using their own capital, decide that it is a worthwhile place to invest.