Reconsidering Tax Increment Financing (TIF) Policy

Tax increment financing (TIF) policy began in 1952 in California according to Wikipedia. It took off as a way to encourage development in BLIGHTED areas of cities.  It was, like so many ideas, seemingly fair and reasonable on the surface, but the reality of today’s use of TIF has been wholly corrupted and may have become self-defeating to particularly for the purpose of encouraging the creation of affordable (and accessible) housing.

California has since realized their mistake and “revoked this diversion of property tax revenues from public funding.” Because even though it seems like TIF doesn’t “cost” anything (that is, no cash is handed to developers), “the city incurs a loss through foregone tax revenue.” (Wikipedia).

SOMEONE HAS TO PAY FOR THE REDUCTIONS OF PROPERTY TAX REVENUE to incentivize developers to build anything at all these days, and affordable housing becomes the hammer used by developers to make sure it isn’t them.

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TIF, AMI, and Subsidizing Profiteering for Affordable Housing

The primary way, practically the only way, Rochester as a city, can ASK builders to build what Rochester needs theoretically requires tax increment financing (TIF).

Contrary to what I assumed originally, which involved some kind of actual TAXPAYER MONEY being given to developers, that is NOT what TIF does.

My current understanding of TIF (which isn’t to say I have it correct yet, math is hard – ha ha) means that the city simply implements a property tax abatement while the development gets built and over the time it takes to get fully occupied and income producing.

The logic of this is that property tax should be charged on the basis of the condition of the existing development. A developer could buy a plot of empty land and then winter could set in and no actual building might take place until the next year. Therefore, “fair” property tax should be charged on an empty lot basis and not on the value of a fully built and occupied development.

When it originated in California in 1952, on the face of it, this seems reasonable. It is obviously true that a vacant lot is not worth as much as a 6-story multi-family multi-use commercial venture fully rented out would have for income.

Likewise, on the surface it would seem that TIF could and should be used as an INCENTIVE to offer as a carrot to developers to do things the city needs like include a percentage (generally 20%) of units for affordable housing. Unfortunately, it seems the developers are the only ones who ever get offered carrots instead of sticks. The residents only get sticks: increased property taxes, parking tickets, painfully inadequate public transportation high sales taxes, and the need to make up for the lost revenue for infrastructure caused by the TIF effect.

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Housing Cooperatives and Affordable / Accessible Housing

When I lived in Queens, NY, I was impressed by the housing unions had built for members. I don’t recall a lot of the details, but basically the union financed the building of many multiple family brick 3 or 4 story buildings that allowed union members to rent apartments at a low rate. No one outside of union membership was allowed to live there. That’s the story I recall anyway. I don’t think the units were owned by the members but they might have been because I remember something vaguely about units remaining in families so long as someone was a union member.

WHAT WE HAVE HERE IS A MARKET FAILURE

After listening and researching and reading and reviewing my own experiences living all over the country, I believe that the pronouncement at the recent Committee of the Whole (CoW) last Monday (Oct. 23,2017) that what we have here is a MARKET FAILURE accurately describes the “affordable” housing situation in Rochester.

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Sales Tax and the Pursuit of $60 Million for Hockey Arena Cabal

In Rochester / Olmsted County the sales tax has gone up and up. You probably didn’t even notice when the DMCC caused Rochester and Olmsted County to increase the sales tax.  Minnesota as a state has one of the highest sales tax rates in the country, higher than California for example. Here is a map from Wikipedia:

map of sales taxes by state

Sales taxes are regressive. This means that they adversely impact the poorest more than the wealthy. In terms of relative percentage of cost to a poor person the loss of 8 cents from $1.00 takes a higher proportion from their total available funds  than 8 cents from the funds of a wealthier person.

And to my shock and horror, as I understood the presentation, RAISING THE SALES TAX WAS ONE SUGGESTION TO FINANCE the local cabal push for a replacement areas following hard on the heels of the failed remodel of the formerly known as Mayo Civic Center. They came asking for a  “public/private” partnership (screw you taxpayers/private privileged pleasure) at the Committee of the Whole (CoW) on Monday, October 9th, 2017.

Men in suits thronged the meeting with the eagerness of little boys at Christmas.

We all know how the Public Art Master Plan public/private “partnership” turned out (BAD!).

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My DMCC Board Open Meeting Public Comments

At the November 2, 2017, Destination Medical Center board meeting, the public was allowed to speak to the board for 2 minutes up to about 5 people (so about 10-15 minutes). The bulk of the comments were on affordable and accessible housing. The basic “ask” was that the DMCC/EDA actively work with community leaders and local municipalities to develop housing options and provide any necessary mechanisms to achieve accessible / affordable housing necessary for the RESIDENTS living here now, and for the future workforce they hope to attract.

Here is what I said (a bit less since I ran out of time, but handed out paper copies as usual; please forgive the typos from my procrastination).

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Open Meeting Law and Public Comments

No open public meeting is REQUIRED BY STATUTE to provide a chance, possibly the only chance, for the public to speak to any given group of public officials.

The Minnesota State Supreme Court has ruled against “strict constructionist” interpretation of the state statute which failed to incorporate public comments into the statute when written. It may not have been specified because it was obvious to the legislators that of course open meetings would have to have public comment periods so it was not necessary to explicitly declare this to be a part of the statute.

The Minnesota State Supreme Court has consistently ruled (3 times that I know of) that a significant benefit of open public meetings is to provide the opportunity for the public to address a group of government representatives / employees as a whole.

Mandatory public comment periods of at least 15 minutes and 2 to 4 minutes per person should be incorporated into open meeting laws by statute.

Is there any Minnesota State Legislator with the guts to introduce such a bill and get bipartisanship votes for the COMMON GOOD of the residents of Minnesota?

Minnesota State Law Preemptively Prohibits Rent Control or Stabilization

Lobbyists for industry organizations are pretty much the equivalent of the Mafia with $$$$ as weapons. In the case of the great state of Minnesota they have done their work well implementing a state law that protects their racketeering and extortion for rental units.

THE REAL TAKERS

Some justify this as based on the Constitutional “takings” clause that mainly refers to things like eminent domain for building roads and such like, but enterprising lawyers have taken it to the extreme and try to pretend that by implementing rent control, rent stabilization, or rental caps tied to the consumer price index, the “state” is “taking” money out of their profitable pockets.

However, the fact that they can arbitrarily RAISE RENTS WITHOUT ANY LIMITATIONS  when the city is  experiencing a crisis in affordable [and of course, virtually zero affordable ACCESSIBLE housing] the suffering is too great to ignore this disparate impact such a protectionist law for the people with money and power have.

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Walkability and Women

DANGEROUS WALKING

A recent Guardian article noted that WOMEN walk measurably less than men and called attention to women’s reasonable fears when walking on city streets.

The CAT CALLING viral Facebook posts have established the reality of the hostility women face simply trying to walk own the city. While some die hard “boys will be boys” types still insist cat calling is complimentary or innocent of actual menace, women know that is not true.

Some design aspects of WALKABILITY might result in less of an urban jungle ambience and thereby discourage bad behavior. However no overt consideration of women’s safety can be seen in DMC urban design plans. Or the Rochester Comprehensive plan for that matter. Women’s safety probably never comes up because women are so severely underrepresented on the city council, on the county board, as department heads, and basically most areas of power in Rochester.

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Minnesota State Visitability Law

Here is the statute. Of course, it does not require private funded developers to comply, only those financed with governmental funds. I think that we should persuade banks to get on board and refuse to lend to developers insensitive to community needs. Maybe they could cut a half a percent interest off for developers who will build ACCESSIBLE AFFORDABLE HOUSING with a VISITABILITY standard that Rochester desperately needs.

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