[Editorial] Bring Development to Earth

March 10, 2010

Tea-partiers and fiscal conservatives make a lot of noise about how much citizens pay in taxes—income, property, sales and so forth—decrying any effort toward increased spending on health care or social programs. It's a black-and-white world to these folks, where the only option for lowering taxes is lowering spending and vice versa.

Economics are more complex than that. Many parts of the conversation are missing, including how to shift expenses from one type of activity, such as federal defense expenditures, to another, like health care or public education. Our collective tax burden is skewed heavily toward corporations, with even the U.S. Supreme Court ruling that corporations have the same rights as individuals.

When we value corporations over people, huge amounts of taxpayer money simply slip through the economic cracks, landing in the pockets of corporate shareholders and Wall Street middlemen. We seem to have decided that this behavior is OK, bailing out multinationals at the expense of the American people.

Corporations are taking America by the short and curlies. With unemployment in double digits, when a big company wants to expand, they have their choice of states to expand into, playing off tax incentives from one against the other. And when a developer wants to build out his property, he has his choice of government-sponsored financing.

But virtually all of the great deals our city, state and federal government hand out have downsides, and all the downsides affect taxpayers—and not necessarily in a good way.

In this issue, in her new eco-devo column, Ronni Mott investigates one type of popular financing vehicle for developers: tax increment financing. In parallel to the glory days of creative financing for mortgage holders, TIFs became golden geese for developers all over the country. But like the interesting mortgage schemes that collapsed the housing market, taxpayers are finding that TIFs aren't the panacea some developers promised, either.

Cities, counties and states all over the country now find themselves unable to provide services to their constituents, partly because they are indebted to developers through TIF bonds. Like the mortgage bubble and the credit bubble, the concept of "buy now, pay later" seems too good to pass up in a booming economy. The problem, of course, is that economies don't always boom, and post-boom we still have bills to pay. For TIFs, those bills can extend for up to 40 years, passing development debt on to our children.

We need to come to our senses about economic development, remembering that all that glitters isn't gold. Let's not mortgage our kids future for the sake of pretty pictures and high-falutin' promises.

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