Hagenow Says He Will Push for Reform to Development Tax Incentives

Rep. Chris Hagenow (R-Windsor Heights) says he’ll help lead an effort in the Iowa House this session to reform a popular economic development financing tool sharply criticized in a new report as pitting cities against one another in the struggle to attract and retain jobs.

What, if any, changes would you like to see made to TIF laws used by local governments to promote economic development? Tell us in comments.

Tax increment financing is a tool cities and counties use to hedge the cost of improvements against the added tax revenue those improvements will generate. Local municipalities, through the Iowa League of Cities, defend the tool as one whose flexibility must be maintained.

“Are we using it for new development to compete with private projects?” said Hagenow, who chairs the House Government Oversight Committee, where reform legislation is taking shape.

“I don’t know anyone who wants the city to compete with the private sector,” he said.

TIF has been widely used by local governments in Hagenow’s district, House District 43, which includes portions of West Des Moines, Windsor Heights and Clive.

“It’s a valuable tool for cities to use to develop projects that might not otherwise get done and accomplish true urban renewal,” he said. “The projects in my district are a valuable part of economic development strategies.”

But he said he’s “seen abuses in other parts of the state,” and there is bipartisan support in the Legislature for reform.

The Iowa Policy Project report concluded that without serious reform, tax increment financing will contribute to a local property tax system that is increasingly unfair, and an erosion of revenues that threatens the ability of cities and counties to finance important public services … in the name of promoting economic development.

Hagenow said he has been meeting with officials from cities in his district to “make sure we don’t overregulate so it’s not a useful tool.”

An Elephant in the Room

Much of the 2012 legislative session will be devoted to property tax reform, Hagenow said. He supports meaningful commercial property tax relief, with some caveats.

“I think everyone understands the system is broken and we need to provide relief,” Hagenow said. “I don’t want the burden to fall back on residential.

“We’re playing ‘whack a mole.’ You knock one thing down, and another pops back up,” Hagenow said “The trick is that no matter what you do, whenever you cut, somebody else has to bear a burden.”

Hagenow said the “elephant in the room” is a provision in proposed commercial property tax reform that requires a “backfill” appropriation to make up for the reduction “so local governments are held as close to harmless as possible.”

In the past, such appropriations have been scooped up for other purposes. Hagenow said he understands that “distrust exists between different levels of government.”

“I understand why a local city council would not completely trust state government, because of past practices,” he said. “But there’s a commitment under new leadership, we campaigned on this, that we’re not going to scoop these funds.

“Hopefully, if we deliver this, we would hope the people of Iowa would appreciate that and continue sending people to Des Moines who support this,” he said. “I’m not afraid to be optimistic on that. In my interactions with people, they appreciate ‘you are doing what you say you’re going to do.’”

Hagenow announced last fall that he wll seek a third term to the Iowa House. In addition to chairing the Government Oversight committee, he also serves on the Appropriations, Judiciary and Public Safety committees.