Beware of promoters bearing taxpayer subsidies for private business. No, I'm not talking (except contextually) about the $38 million economic development slush fund that the Little Rock Regional Chamber of Commerce demanded be included in the 200 percent sales tax increase facing Little Rock voters Sept. 13. (Not Sept. 10 as I originally wrote.)
I'm talking about another favorite hobby horse — Tax Increment Finance districts. This is another developer scam rammed through a compliant legislature that has fallen far short of the miracles predicted. It won't even work, we now know, in prosperous cities like Fayetteville. It was sold dishonestly as a blight-fighting tool and economic stimulus, but it never was going to work anywhere without a vibrant, rising economy and high property values. And even then it was no more than another corporate welfare payment.
The Northwest Arkansas Times has an article today (pay wall) outlining the failure of the downtown Fayetteville TIF district. The University of Arkansas pie-in-the-sky economic forecasters had predicted prosperity would gush on the city and easily pay off $3.7 million in bonds to tear down the old Mountain Inn as part of a redevelopment plan. Oops. The real estate bubble. Irrational exuberance. Poor prognostication. All came together for a situation in which the expected property value increases that were to spur increasing tax collections from the city, county and schools to pay off bonds haven't materialized. It doesn't look like the bonds can be paid off in the statutory 25 years. (And, by the way, the rough estimate is that taxpayers are going to pay, over time, maybe $15 million for the project, counting interest and bond daddy and legal fees.)
Small point missed in the article: City officials dismiss the impact of the TIF district, which directs tax money away from local governments for development projects, as having cost Fayetteville only $22,000 this year. The loss to the local school district is probably triple that amount because the city levies only 3.1 mills in property tax, while the school district levies 42.9. The first 25 school mills and bond millages are exempt from the TIF set aside.
Also unaddressed in the article is the promise that, in addition to bonds being easily paid off, city coffers would swell with rising propsperity spurred by the demolition project. This trickle-down would somehow hold schools harmless for loss of property taxes. Right. And still North Little Rock Mayor Pat Hays and his legal stooges won't surrender on the illegal TIF district they drew up to siphon off school property taxes on a new apartment building to build a parking deck. Perhaps they should look to Fayetteville and fold that hand.