TIFs Bring Unintended Consequences

By establishing a tax incremental financing (TIF) district, a community is able to borrow money to pay for project costs of a new development.  The project’s property taxes are used to pay off the debt over time.  

I have numerous ideological and pragmatic objections to the concept of tax incremental financing, but for now, I’ll start with two. 

As you may have noticed, Greendale leadership has become quite enamored with using TIFs for “economic development”.  The third proposed TIF district (the Boston Store renovation) is up for approval this month and has been met with little resistance. 

One of the unintended consequences with TIF projects is that they send the wrong message to current businesses.  We should not be eager to hand out multi-million dollar TIF deals to companies that could not justify the project enough to invest that money themselves, or could justify the investment but aren’t required to do so.  These TIF deals infringe upon the private sector and tip the scales in favor of their recipients.  That does not increase competition, only resentment.

Without question, the TIF projects jeopardize Greendale’s long-term economic viability.  Entrepreneurs are less likely to invest in a community whose political leaders have demonstrated a pattern of free-market intrusion.  Now that we’ve literally invested in these projects, will we ever let them fail, even if they deserve to do so? 

Modern history has taught us that one of the hardest things for the market to adjust to is unpredictability.  Support for this conclusion is overwhelming, as government meddling in the private sector lays a foundation of uncertainty.  Greendale’s relatively limited tax base and shrinking population make the consequences of these TIF projects undesirable for the future generations of Greendale residents.  And with every new TIF district, the risk mounts.  

Similar short-sighted government intervention has crippled other localities in the region, ones with far greater resources than Greendale.  Look no further than to our neighbors to the south, Chicago, for myriad examples of TIFs gone sour.

Even though our leadership argues that we need to use TIFs to attract investors, it’s unclear who is using whom. Nevertheless, it’s not the way our local government should be approaching economic growth.