Remarks to be delivered to the Wichita City Council on August 12, 2008.
There’s several reasons why this council should not approve this request for TIF financing.
Material in today’s agenda packet doesn’t specify an amount, but past materials indicated that the project was $2.5 million short of the total needed for the project.
Now some on this council feel that TIF financing isn’t an outright subsidy or gift to the developers of a project. But let me ask you this: if the project is $2.5 million short without TIF financing, and then with City of Wichita TIF financing the project is fully funded, what does that tell you about the value of the TIF district to the developers of this project?
Under TIF financing, the City of Wichita doesn’t directly give developers the money. Instead, the city issues bonds, and then uses the proceeds from the bonds to do things that directly benefit the developers.
Now if the developers borrowed that money from a bank, they’d have to pay back the loan. Each year the developers would have to make the loan payments, and also, just like everyone else, they’d have to pay their property taxes. (Those taxes have increased as now the development is worth more due to the improvements made by the developer. That’s the “increment” in TIF.)
But with a TIF district, the bank is the City of Wichita, which issued bonds to pay for things the developers needed to make the project work. So the developers have to pay back the city. But instead of making payments on a loan from a bank and their property taxes, all the TIF developers have to do is pay their property taxes. By merely paying the same taxes that everyone else has to pay based on the value of their property, their loan is repaid.
That’s why a TIF district allows developers to effectively avoid paying some or all of the increased property taxes on their development. When a development is undertaken without the benefit of a TIF district, developers have to repay loans and pay higher taxes. With a TIF district, all the developers have to pay is higher taxes.
I’m tempted to ask this rhetorical question: Why don’t we strip away all the confusion and obfuscation surrounding TIF districts and just give the developers $2.5 million? This way, we fund the development, the shopping center is remodeled, and we wouldn’t have to come back year after year, evaluating the TIF district to see if it is meeting its goals, perhaps pouring in more funds if it isn’t. Instead, we could just give Reverend Harding’s group $2.5 million, wish them good luck, and be done with it.
But I don’t want to seriously pose that question, because I’m afraid of what this council’s response might be.
Besides this, there’s another reason to oppose this TIF district, or at least insist this be handled in a special way. Reverend Harding is a member of a board that has to give its tacit approval to the formation of this TIF district. That board doesn’t have to take any positive action; all it has to do is nothing. I spoke to this council about the thorny ethical issues surrounding this on July 8th. At that time Reverend Harding said that he informed the city and his colleagues on the Wichita school board of what he was doing. But it’s not to them that he has an ethical obligation. Instead, it is to the citizens of Wichita and the residents of USD 259 that he has the ethical obligation to make sure that this matter is handled with appropriate transparency. To my knowledge, he has not done that.
Finally, I have asked Reverend Harding several questions, but he has not answered me, even though I am his constituent: How much tax revenue will the Wichita public school district forgo if this TIF district is granted? And given Reverend Harding’s votes to increase property taxes and his urging for taxpayers to pass an expanded bond issue, shouldn’t he set an example and pay his full share of taxes like everyone else?