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San Antonio Express-News - May 21, 2000
TIFs neither the only way nor the best
By: Carlos Guerra
Before agreeing to any new tax-funded development, it's wise to understand all the options.
Since voters overwhelmingly rejected a tax increase to extend the River Walk - which would have increased nearby
land values - the notion of doing it with tax increment financing is being discussed again.
One reason may be that TIFs don't require voter approval.
But a TIF deal approved by Corpus Christi's City Council in March highlights other things to consider.
The North Padre Island Storm Damage Reduction and Environmental Restoration Project, officials say, will be "a
risk- and cost-free environmental improvement" that will set off a tourism boom.
But a closer look reveals a taxpayer-funded scheme to dig up Packery Channel and use the sand to rebuild the
eroded beach that fronts a waning development.
TIFs are really self-funded tax abatements. When a TIF district is defined, property taxes within it are frozen at
current rates. The TIF district undertakes improvements intended to raise property values within TIF boundaries.
The increased tax revenues - or tax increment - that result from higher values repay the cost of improvements plus
interest.
Dredging a shortcut for boats to the gulf from inland-side vacation lots and restoring the beach probably will increase
values for well-connected property owners.
It also will pay to create 3.5 miles of pricey new waterfront and two 1,300-foot jetties into the gulf.
But to say improvements come without a price is plainly wrong.
Taxpayers whose property is not in the TIF will be stuck with new costs, not the least of which will be the perpetual
maintenance of the jetties, canal and beach.
Increased economic and human activity also increases the need - and cost - for public services. New tax revenue will
repay improvement costs, but non-TIF taxpayers will pay for the services.
Still, Tom Udder, the assistant city manager that put the Packery Channel package together, says it is a near-perfect
TIF because the restored beaches and new canal will set off a real estate boom.
But what if a development boom does materialize, and hotels, vacation homes and retail areas explode with economic
activity?
Who will pay for the additional fire, police, health, water, sewage, drainage and other public services costs the boom
area will require?
What's more, Utter says, some of the TIF's bond money will "be endowed in a maintenance fund" whose earnings
supposedly will pay maintenance costs for the canal, jetties and beach.
This sounds great until you realize that redredging the shifting sands was estimated to cost $400,000 annually in 1999
dollars. If the TIF's endowment doesn't earn as least that much, other taxpayers will be stuck with that tab.
Any River Walk TIF should raise similar concerns.
Of course, Padre Island and River Walk property owners could increase the worth of their properties without
encumbering the rest of us with the bill.
Instead of creating a TIF, they should create improvement districts. Instead of paying for improvements with tax
money diverted from taxing entities that need it to offset new expenses, an improvement district would levy an
additional tax on property whose owners will benefit.
Like TIFs, improvement districts can sell bonds for big improvements, but they don't stick other taxpayers with
hidden costs.
Financed with an improvement district, the Padre Island and River Walk projects really would be cost- and risk-free
to taxpayers.
And improvement districts only need approval of the beneficiaries!
To leave a message for Carlos Guerra, call ExpressLine at 554-0500 and enter 4410, or e-mail
cguerra@express-news.net.
Copyright 2000 San Antonio Express-News
Record Number: 490338
Reprinted with permission from Mr. Carlos Guerra
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