Greg LeRoy
Comments for “Tax Increment Financing Coming to the Big Apple? Risks and Opportunities” New York City ‑ March 12, 2003
Good morning and thanks to the Planning Center of the Municipal Art Society, the Center for Workforce and Economic Development and our own Good Jobs New York for staging today’s event.
Good Jobs First is a national resource center promoting corporate and government accountability in state and local economic development. Good Jobs New York, our partnership project with the Fiscal Policy Institute, tracks the problem of “job blackmail,” or companies demanding huge “retention” packages by threatening to leave Manhattan. It also provides the only comprehensive database on monies intended to rebuild Lower Manhattan after the September 11th terrorist attacks at Reconstruction Watch.
We are here today from Washington and Chicago to provide EARLY WARNING to New York!
There are three new vocabulary words we all need to learn today:
Abatement (or exemption) ‑ this means the non‑payment of property taxes, sometimes phased in or out.
PILOT ‑ which stands for Payment In Lieu Of Taxes ‑ this is essentially an abatement with a fig leaf, in which the property owner pays a fraction, often a small fraction, of what he would otherwise normally owe to support public services.
TIF ‑ or Tax Increment Financing ‑ which is a diversion of property taxes. Originally conceived to help revitalize depressed inner‑city areas, TIF allows a city to designate a small “TIF district” and say: we are going to redevelop this area, and when we do, property values will go up and therefore property taxes will go up. When that happens, we will split the tax revenue into two streams. The first stream, set at the “base value” before redevelopment, will continue to go where it always has: to schools, police, fire, and other public services. The second stream, made up of all the increase – or “tax increment” – will be diverted back into the TIF district to subsidize the redevelopment.
This diversion can last 15, 23, even 40 years, depending on each state’s rules. In other words, it can divert a lot of money for a very long time.
The bottom line for New Yorkers is this: when there is redevelopment of the Far West Side (that is when, not if), there will be: more students needing more classrooms and teachers; more need for police, fire and sanitation services; more need for social services; and more infrastructure to maintain. But if there are no new property taxes coming from that redevelopment to help pay for those new costs, guess where the burden gets shifted?
We have provided you with a few handouts to make the point. First, there is the notorious Dairy Queen TIF from Caledonia, Minnesota. As you can see, it provided a subsidy worth $275,000 to create one new job at Dairy Queen paying $4.75 an hour! On the next page, you can see that of the 38 deals we found in Minnesota that cost $100,000 or more per job – frugal, Lutheran Minnesota – 30 were TIF deals. Next we have provided you with the cover and website address of our new study done for the National Education Association about how TIF can harm school funding; we also have copies of the study itself available at the registration desk. Next, we have the website for our research manual, No More Secret Candy Store, as well as its TIF entry. Finally, we have provided Neil deMause’s article from the Village Voice.
TIF has its place, but only if the City bases the project on a shrewd market judgment, if it uses TIF to truly leverage new investment that would not occur otherwise. Yes, public investment will be needed to stimulate the redevelopment of the Far West Side. But the City must not lose sight of the inherent market value of that land, the last big parcel like that in Manhattan, and so close to so many other extremely valuable assets.
The trick is how to prime the pump and then turn off the public spigot and let the invisible hand of market forces work their wonder. How to stop the “me toos.” It all boils down to the City making a shrewd market judgment – based on an accurate self‑image and an accurate judgment about the inherent value of the Far West Side.
You must not allow the City’s current hard times to cause City leaders to misjudge that calculation, to undervalue, to overspend.
There are always business cycles and obviously the nation is in one now, and New York is suffering disproportionately. And of course, 9/11 is making things worse, as Bruce Herman will detail. But New York still has so many advantages and assets and linkages – skills, cultural, financial, intellectual – the challenge is to build on those assets, rather than give away the store in a TIF district on steroids out of misperceived desperation.