The Trouble With That TIF

The economic reasoning on which the majority members of Salisbury’s City Council base their desire to do “tax increment financing” (TIF) subsidy deals with developers is specious because of its limited horizon. If not corrected, their myopia will cause those tax increases that we have already been told to expect, beginning next year; to be much greater than otherwise will be the case.

Messrs. Comegys and Dunn along with Ms. Cathcart contend that financing development of the old Salisbury Mall site with funds borrowed by the City ($13.8 Million) - to be repaid, with interest, by tax revenue from the property that normally would become part of the City’s “general fund” for its operating costs - will yield additional tax revenue greatly in excess of that needed to amortize the bonds (about $25-30 Million). Their viewpoint is limited to the mall and adjacent “St. Albans Commons” parcels, which are owned in common.

They fail to consider the overall effect of the TIF subsidy that they propose to confer upon the real estate investment group for which “Chesapeake Realty Ventures” (Natelson & Dzaman) and a public relations firm are promoters. When viewed comprehensively it can be seen that the TIF deal would not serve the public interest and would simply benefit the property owners by funding certain costs that are normally paid by the developer, not the City.

Development that occurs at the old mall or the adjacent site will result in less development elsewhere – someone who buys or rents premises there would otherwise do so at another location, for example (to name a few) the former Hearne property on Dykes Road, the Aydelotte farm on the future “Northeast Collector” (another TIF deal), the Farlow farm also on that road, and other locations where development is planned or ongoing. Total development will remain unchanged; some portion will occur at the mall and adjacent sites rather than elsewhere.

Consequently, the City’s additional property tax revenue will not be increased by the TIF subsidy. In short, the total tax revenue will be the same as if the TIF deal were not done – the greater tax revenue from the mall sites will be offset by lesser tax revenue as a result of development elsewhere; the net effect will be zero.

Not only will the huge amount of tax revenue needed to fund the TIF subsidy never be repaid to the City (or to Wicomico County if it participates in the TIF deal), the hypothetical “additional” tax revenue is an illusion, as cities and towns that have embraced TIF’s are learning the hard way. Because the City of Salisbury is being advised by “TIF professionals” who profit from fees from doing TIF deals, it’s not surprising that we haven’t heard the real story.

Technorati Tags: Wicomico, Salisbury, politics, wicomicopolitics, salisburypolitics, TIF, development, subsidy

powered by performancing firefox