Around Des Moines

Chris Coleman and Josh Daines, candidates for the at-large city council seat in Des Moines, have different opinions on how tax increment financing (TIF) should be used. Coleman favors a generous use of the program and Daines wants a narrower use. After the candidates talked at a recent Drinking Liberally meeting, several young adults asked what TIF is.

Tax increment financing refers to the increment, or difference, in taxes that a high-end development will bring in compared to vacant or under-used land. That new revenue, not yet on a government’s books, can be used without changing current budget items. The new revenue can be used to reward developers for building and to add or to improve infrastructure (e.g., streets, sewers). It can also be used to build new public-use facilities (e.g., a science center or a playground). The increment only works if the current tax revenues are low. This means green space will be used in upper-income neighborhoods. However, the usual stated intent of TIF is to increase the revenue-generating power of blighted areas. Problems arise when what a city considers a blighted area is considered by residents to be non-subsidized affordable housing. Gentrification and eminent domain often are involved when TIF is used.

Proponents of TIF argue that it is better to use the financing tool and obtain some benefit than to leave land alone. Opponents of TIF argue that it is a give-away to developers and that the general public does not benefit sufficiently to continue using such financing. In reality, TIF may be used for improvements but the increment increase does not help to offset everybody else’s property tax or other local tax payments. This is because the difference between the pre-development tax and the post-development tax is used to pay the costs of development and to build the playgrounds or new streets. It is not used for general budget purposes. TIFs can stay in effect for upwards of 20 years.

There was a TIF area in the neighborhood where I lived in Minneapolis. The entire blighted area included four blocks: a surface parking lot, a construction company, an abandoned window factory, and an abandoned historical warehouse. The first two blocks with development plans were the parking lot and the construction company’s land. The construction company was moved to south of Minneapolis at considerable cost. Then the land was tested for contaminants and townhouses and affordable (80% median income) condominiums were begun. The housing market started sinking so the condominiums were redesigned into smaller units that could be rented as apartments. The two abandoned buildings continue to be abandoned and blighting the neighborhood, despite the fact that they were included in the TIF because they allowed the other blocks to be counted in a blighted area. Sherman Associates wanted the land where the construction company was. This is the same company that is looking at the land south of the railroad tracks in Des Moines, land with working businesses that the city wants used for housing.

Guest Writer: M.R. Field is editor of Leading Voices: Iowa.