Wednesday, December 30, 2015

On TIF, Gahan and lessons from the Irish property bubble.

Whether you like it or not, and I don't, Mayor Jeff Gahan is reshaping New Albany according to his own sanitized suburban consciousness filter. It's urbanism via the "logic" of the cul-de-sac.

In large measure, Gahan is paying for Disneyland (Bucharest) on the Ohio with TIF (tax increment financing). As New Albany's TIF odometer spins wildly, ever upward, the mechanism itself is coming under ever greater scrutiny.

Taken together, the following two links from February and December make two central points: First, that TIF's panacea generally is overstated, and second, that there is considerable potential for abuse in the mechanism, given the tendency of cash to flow from prime beneficiaries to the politicians enabling them.

From February 15 ...

BOHANON & STYRING: Communities lose more than they gain from TIFs, by Cecil Bohanon and Bill Styring (Indianapolis Business Journal)

 ... One thing is certain: Any benefit a TIF confers could be directed to other parties in other locations.

Members of TIF bodies are typically neither bankers nor elected officials, and they are not playing with their own money. Members may be well-intentioned, but they have little background in assessing risk, and voters have difficulty holding them accountable.

Developers, various financial consultants and other interested parties stand to make a great deal of money from the deals, so the whole process has the potential for incompetence, cronyism—or worse.

 ... and December 26 ...

Hicks: Economic development is important, by Michael Hicks (Logansport Pharos-Tribune)

 ... Earlier this year, my center published a technical economic study on the effects of tax increment financing in Indiana. The results were clear. TIF boosts investment within TIF districts, but reduces it outside the district. TIF use increases taxes and reduces countywide employment, albeit modestly.

That generated a wild response.

This final passage by Hicks is an eye-catcher for me, coming just after I'd watched a documentary film about the Irish property bubble's bust, and the intimate connection between the bubble's creation and the corruption of Irish politicians on the take.

 ... earlier this month yet a third study on TIF was published in the Indiana Policy Review. It is too long and detailed to review here, but suffice it to say that county prosecutors and the state attorney general’s office will surely be reading it closely over the holidays. It details extensive shenanigans with TIF in at least one county.

In the years to come, keep an eye on NA's TIF meter. It may not seem like it now, but the metaphorical heel of Achilles can come to us from almost any unexpected direction.

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