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Friday, September 11, 2015

Local Tools Rework TIF Districts Into Tax Exempt Districts For the Oligarchs

The so-called "deal" slapped together by government bureaucrats to bring a Dollar General warehouse to Janesville is an amazing piece of work. Let me explain.

If you have a basic understanding of Tax Increment Finance Districts like I do, you probably know there are several "supposed to be" parts of the economic development tool that, well, ...are supposed to be. That is to say, there are unique elements that make a TIF District, a TIF District. But apparently, that is all changed now according to the Janesville Gazette and the tools the oligarchs have planted in Janesville city government.

In their sidebar on the story about Dollar General building a warehouse in Janesville, the Gazette posted a "what is a TIF District?" summary that is worth disassembling for this posting.

It begins...

Gazette TIF District Excerpt:
Tax incremental financing (TIF) is a tool for governments to attract private investment. It is intended to allow municipalities to acquire property, eliminate dilapidated buildings, make improvements such as sewer, water and streets and charge the cost to a TIF district.

First of all, TIF districts were not designed or intended to be used by municipalities to "acquire" property or weaponized to allow private parties to acquire property through government force or below market value. But apparently, according to the newspaper's new definition, that is how a TIF District works. The part about "charging" the cost of common areas and infrastructure to the district IS how it is supposed to be, but ironically, that's not how the TIF works for Dollar General.

Let's move on.

Gazette TIF District Excerpt:
The municipality then offers sites in the TIF district to businesses for free or at great discounts to draw development.

Again, offering sites for free or at great discounts was never codified or the intention of TIF Districts. Of course there are no laws preventing a city from giving away land for free the city purchased with taxpayers money. Some folks think that is a major corruption in government. But few people if anyone outside of this blog ever objects to the practice, so it looks like Janesville taxpayers are apparently wealthy enough to fund this new entitlement for developers.

Gazette TIF District Excerpt:
As the district’s property value rises because of the new investment, the increases in property taxes are used to repay only the municipality’s costs. When the costs are paid or the district’s limited life expires, the new property taxes are distributed among all taxing jurisdictions, such as school districts and the county.

Here again, the Gazette returns to TIF District basics, but that's not how the TIF District works for Dollar General.

Gazette TIF District Excerpt:
During the life of a TIF, taxing districts such as schools receive the same property taxes they did before the new investment raised the property value.

That's also true. In the case of the Dollar General TIF, it means the city, county and schools will likely receive only a few hundred dollars a year from the development, if anything.

End of story? Not quite.

You see, not only will the city be giving land valued at $4.25M to Dollar General for free, but the property taxes on the new incremental value DG is supposed to pay "to repay the municipality's costs" WILL BE REFUNDED to them for the first ten years. That also means DG's TIF district will not produce a $1.5M surplus near the end of the 10 year term. The deal essentially terminates the stakeholders responsibility for funding TIF District infrastructure and relegates the TIF application to a simple legal platform for local tools of the oligarchy to exempt Dollar General from its property tax obligations.

So the question to ask is; who is paying the $2.4M in costs on improvements such as sewer, water, streets and other common areas inside the TIF district?

Everyone except Dollar General.

This is where on Monday, the Janesville council will submit a Transportation Economic Assistance (TEA) grant for $1.2M from the Wisconsin Department of Transportation on behalf of DG Distribution Midwest, LLC, or Dollar General as we know them.

Where does the other half of the $2.4M come from? From surplus cash in Janesville TIFs 22 and 35 - surplus cash that should have been headed to Janesville taxpayers to help lower the tax burden or pay for street maintenance or other public infrastructure.

In short, the $3.9M in property taxes being refunded back to DG over ten years will obviously not be available for the TIF District to cover the $2.4M in infrastructure costs or leave what should have been a $1.5M TIF surplus. Instead, state taxpayers will be tapped to split those costs with two TIF surplus accounts. The bottom line? The oligarchs always win.

Oh, just to add more perspective to what 40 years of these kind of failed growth policies have brought to Janesville, the city council on Monday will also be voting to double the city's wheel tax to pay for street maintenance the perpetually expanding tax base couldn't afford. Hey, somebody has got to accept higher tax obligations to pay for it and there's only enough falling from the city's magical money tree to cover the oligarch's share. Sorry.

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