A huge discussion has been going on outside the list. I feel that any
discussion that cannot live in the light of public scrutiny is inherently
wrong. Many people have promised to blast me to bits if I speak up. I will
speak up with all the courage and knowledge that I have. If I am found to be in
error, so be it. Please read and forgive the length of this note, for I cannot
respond to all arguments with only two notes and a flaky computer system. In
the interests of fairness, everyone should declare their interests. I am a
taxpayer, not any public official, not involved in any real estate and not
particularly targeting any one person.
The first great lie of tax increment financing is that credit is not real
money. Any of us who do our own finances realize that credit has to be paid
back with interest, so it is not only real money but dangerous because one
could easily spend what cannot be easily paid back. In my personal life, the
most stupid buying decisions were made on credit. In our government decisions,
credit is even more dangerous, for government officials can dodge public
accountability for credit decisions for at least two terms. The prime example
of the danger of credit is most demonstrated by our current federal spending.
We all have more influence over our city government, so let take a close look
at the credit spending, called tax increment financing, while counting credit
as real money.
The second great lie of tax increment financing is that we the taxpayers are
not contributing additional taxpayer dollars! The argument goes that since that
funding is paid back with dedicated tax dollars, it really doesn't cost us
anything. Notice the dedicated tax dollars are counted twice in this argument,
once as a loan payment and once as a tax payment. Now really, one dollar cannot
be counted twice. So either the property taxes are free or the loan payments
are free.
So if you answer that, actually, the tax increment dedicated payback property
taxes are really just loan payments, then why does this property deserve more
than 10 years of free taxes? Since this property is being developed it is
consuming much more of the city services, which leave LESS for the rest of us.
So this actually this means because we have to support this non-contributing
property, there is less tax dollars for everything else. One of our principles
should be that all private and profit potential property should pay a fair
share of taxes. And we property owners are now looking at our fair shares
closely. We should also look at who is not paying a fair share, and especially
in this case of NO property taxes.
So if you answer that, actually, the tax increment dedicated payback property
taxes are really just the tax payments, then we, the people and taxpayers, just
gave free tax increment money to a private entity. Letรขยยs use 9.6 million
dollars as a representation of that free tax increment money, so it feels like
real money. We have already made the point that credit is real money. Just look
at the amount of tax dollars that are going to debt reduction when you go to
the truth-in-taxation hearings. So whether credit or current funds is used, all
spending dollars should go in the same consideration of how we spend tax
dollars. Therefore I believe that the tax increment money should be considered
a give-away and go head-to-head in the taxpayer consideration with education
dollars, service dollars or tax reductions. No matter how you answered the
question of whether the property taxes are free or the loan payments are free,
the truth is that we the property tax payers are directly contributing 9.6
million dollars or whatever the tax increment amount is. What could 9.6 million
dollars buy us in education or services or reduced taxes?
The third great lie of tax increment financing is that no development would
happen without us taxpayers giving the private entities money. Investments are
happening all over the city without any public contribution, yet these select
few investments NEED taxpayer dollars. Actually, we have trained our downtown
real estate people to ensure that they only build with additional government
funds. So lets call their bluff and not give them any money. The worst that
could happen is that we have an undeveloped piece of property and unspent 9.6
million dollars. Since urban land is scarce, the property will probably
continue to accrue value, like all of our properties. When truly private
development comes along, then we will actually get the benefit of more property
taxes without any public contribution. Until then, we could have a park or low
rent property. The alternatives sound wonderful to me, the taxpayer.
The fourth great lie of tax increment financing is the developer is taking all
the risk. If things go bad, the frequent saying goes, the developer loses his
shirt. Actually, if things go bad, we the taxpayers lose the loan payments and
the additional property taxes, and have to pay that 9.6 million from reduced
services or increased personal property taxes! Speaking of risk, when the
housing bubble is about to burst due to rising interest rates, is now a good
time to bet on the risk of housing? So we have all of the risk of the 9.6
million and NO chance of sharing in any of the profit. And when I say profit,
don't only look at the official profit but also in the profit of the developer
using his or her own company and drawing a personal salary. Gosh, with a 14
million dollar salary, there is no profit! As we have learned from recent
corporate bankruptcies that previous profit taking and previous salaries are
not touched, while companies simply shed debt and obligations and then
continue. Notice that we, the homeowners have personal bankruptcy laws that are
much tougher. The developer will not lose his or her shirt, he or she will
probably not even lose his or her Porsche.
The fifth great lie of tax increment financing is that we are getting benefits
that make the 9.6 million dollars worth it. Benefit 1) The developer is very
nice to the community and builds the development, while incorporating community
concerns. My recollection may be wrong, but it seems to me that the St Thomas
development did this without public funding. It seems that any of us who simply
build even a fence have go through rules, permits and inspections. So why do we
have to publicly contribute for what should be done just because one is part of
the community? Benefit 2) The development is building something we want and
need like more housing downtown. It seems to me we have an abundance of
housing, both rental and for sale. Adding more housing to the mix seems to
actually be a bad idea, particularly since there are less services downtown,
like grocery stores. Benefit 3) The developer is providing LOW INCOME housing.
It seems to me that we subsidize much more low income housing with 9.6 million
dollars by doing it directly instead of giving the money to this developer. We
have chosen a really expensive way to do it. Does anybody know exactly how many
low income units at what price we get? Can we get that answer in public like on
this list? 4) The old no-longer-believed trickle down argument of jobs and
economic activity. All of us taxpayers could easily spend that same money to
generate the same amount of jobs and economic activity. This happens unless
someone keeps their money in a mattress.
And finally there is the issue of words. Deception is the gentle version of
lies. I used the word, lies, because to me that is what deception is. So then
there is the question of the word, corruption. Is it fair to use the word,
corruption, when one is being deceived or lied to? To me the fair issue, would
have been a November 8 referendum to the voters of do you wish to commit 9.6
million tax dollars to x project? What do you think? Is it fair to ask if that
9.6 million dollars would have been better spent on unspent credit, education,
services or reduced taxes?
It has been long note, but let indulge in one more consideration. What should
we do going forward? Obviously what is done and built cannot be undone, but we
don't have follow bad decisions with more bad decisions.
So looking to the future:
1) Lets put a stop to all tax increment financing until our property tax
payments are actually decreasing and we have had at least two years to study
all previous tax increment projects.
2) Lets investigate, evaluate and publish the results of every previous tax
increment financing project including estimated real profit. On the basis of
this evaluation, lets exclude any people or companies from future tax increment
projects, who have in any way deceived us or profited unfairly in the past.
Lack of cooperation or communication should also exclude any people or
companies for future tax increment projects.
3) Ask lots of directed questions at our truth in taxation hearings.
I believe that we can improve our government and make better decisions. Since I
am but one taxpayer with no deep pockets nor great amounts of time, if you want
better government, then you as a taxpayer will have to also take up the cause.
I am just one voice. And I can only write two notes on this forum per a day. So
your help is needed.
Thanks for reading this,
Grace Kelly, Merriam Park