Friday, May 23, 2008

A note on TIRZ

One of the most contentious issues at the last few City Council meetings was our Tax Increment Reinvestment Zone or TIRZ. Almost a half hour of public comment was devoted to problems with a decision on TIRZ at the last council meeting. We have been remiss in coverage of this issue, and hope to correct that starting now.

First off, what is a TIRZ? A TIRZ is an area where Tax Increment Financing or TIF can be used to attract development or redevelopment. I know, another acronym. Here is how it basically works. Say you have an area that needs some serious help, like our downtown and north Chadbourne areas. At one time they were thriving corridors of commerce. Now they have many run down and vacant buildings, and only a few thriving businesses are located there. TIF is a method of encouraging commercial development in such a zone. When you establish a TIRZ, you set a baseline for all the property values in that zone. Sometimes you do the same for sales taxes. Any property (and sometimes sales) taxes collected on that baseline go into the regular city budget. When property values and sales increase in the zone, a portion of that increase, an increment, is set aside in a special fund that can only be used for public improvements and infrastructure in that zone. This is to help guarantee that the tax growth in the targeted area is used to help that area instead of being siphoned away for projects in the high rent district. This encourages businesses to locate and invest in these areas because they know that as their property value and business increases, most of their extra tax money will go right back into the area they are investing in, which will help grow their business and investment. The TIRZ is overseen by a board that uses this extra tax money to establish programs that develop and diversify the economy of the zone, eliminate unemployment or underemployment in the zone, develop or expand transportation, business or commercial activity in the zone, make grants and loans, and stimulate business and commercial activity in the zone. Key component is that the benefit must be primarily for commercial development within the TIRZ zone.

San Angelo, after years of work, finally established a TIRZ. They could have established two TIRZ, but for reasons of politics and efficiency established a single zone with 2 halves, a north half and a south half. The fund would on paper be split into two funds, but the decisions for both halves would still be made by a single board. When the TIRZ and its board were approved, city council set down the condition that funds collected in each half would be spent in the half where they were collected. Everything was going fine until the April 15th council meeting. The TIRZ board forwarded a recommendation to the city council that $140,000 in TIRZ funds be used as matching funds for a grant for sidewalk and right of way improvements around the new library. This would have to come mostly from the north TIRZ fund because the south fund hadn't collected enough yet to cover the request. At that time, the council voted to send it back to the TIRZ board to consider borrowing the money from the north fund with some repayment plan as the south fund grew. At the May 6th meeting, the original proposal with no changes was resubmitted to the council. After some intense discussion, it was passed by a 4-3 vote. At the next meeting, on May 20th, the bulk of the public comments portion of the meeting was probably close to a dozen speakers, many from WTOS, calling the council to task for going back on a promise of how TIRZ would operate.

So why the controversy. During the discussions at the council meetings, it was stated that the library project was a once in a lifetime project that serves the entire community. It benefits both the north and south halve of the TIRZ, as well as the entire county. There are some problems with these arguments.

First off, this is not the only "once in a lifetime" project that will occur within the TIRZ as a whole. Prior to this another "once in a lifetime" project that will benefit both halves of the TIRZ and the entire community was given north fund money: the new transportation terminal that is going to be built soon just south of the loop on Chadbourne. There was never discussion of using south fund money for this project. It was in the north zone so the north paid for it. There are certain to be more "once in a lifetime" projects in the future. Should north fund be used to help remodel the City Auditorium/City Hall? That is far older than the current library we are moving from, and as a historic landmark improvements definitely qualify as "once in a lifetime." Where else? River walk? Convention center? Parks? The reality is that there are a large number of project that are "once in a lifetime" and "benefit the entire city", but that is not what TIRZ is supposed to do.

If you read the statutes and guidelines on TIRZ, they recognize that all TIRZ projects should benefit the entire community. They also explicitly state that any TIRZ funded project PRIMARILY benefits the TIRZ area. We split our fund in half so that south funds would primarily benefit the south, and the north funds primarily the north. TIRZ was not intended to fund projects just because they benefit the entire community. TIRZ is supposed to promote commercial growth and revitalization within the zone. Then the benefit to the whole community comes when the area is healthy and vital and no longer needs special treatment. That is the promise made to the community when you form a TIRZ. That was the promise the council made to the community when they split the TIRZ into two halves. At the May 20th meeting, a great many citizens said they thought the council broke that promise, and they don't want to see it happen again.

Most of this post I wish I had made after the April 15th meeting. Lots of excuses, but no good reasons. Will try to be more on top of issues like this in the future.

1 comment:

  1. TIRZ and TIFs and general acronym-laden subjects may contribute to the MEGO (My Eyes Glaze Over) effect, but they are nonetheless important. They have to do with tax money collected and spent; promises made and either kept or not.

    As to the promises part of that, perhaps more significant than the dollar amount is the trust, or resulting lack thereof resulting from using a fast and loose interpretation to respond to a "once in a lifetime" opportunity.

    On this particular, I have some history. I recall from about the "lifetime" of our youngest voters, the original city purchase of the Hemphill-Wells Bldg. It was rushed through due to the urgent necessity of having that space to expand City Hall offices.

    I opposed both the purchase and its intended use. I remember speaking to Council after the purchase had gone through, and suggesting the bldg. would make a far better library than office space, pretty sure I used the term "jewel in the crown" of downtown revitalization.

    I was scolded by then Mayor Fender for not doing my homework, studies had shown the bldg. would never be structurally adequate for a library. Which is closer to fruition; Fender's City/County merger or the new library? Dammit, where is that Karnak turban?

    Point is, I am a huge fan of and lightweight contributor to the library idea. I am also a huge fan of straight-talking city gov't. More than the legalese justifications, TIRZ recognised the long-standing economic dividing line in San Angelo and promised northside money would go there and vice-versa.

    Save that a few good things are finally happenening in North Angelo, there would be no pot o' money to argue over. I tend to be suspicious of overly complicated financing schemes by govt's local or larger, they too easily become "derivitive investments" or the govt. equivalent of sub-prime mortgages.

    On this issue, Council needs to look over its shoulder at the SAISD Board. That body is perilously close to losing another bond issue; Number One downside, trust. They have none.

    The last couple of Councils have been the best we've had in a long time. Landmines laid by Councils long past blew up in their faces, but rather than going for the "lipstick-on-a-pig" option, they chose to deal honestly with us rather than take the ever popular pass-the-bill-to-the-next-generation route.

    I want the new library as much as anyone, save possibly Ralph Hoelscher who really made it happen, but I am unwilling to take budgetary shortcuts that leave citizens feeling betrayed.