Thursday, September 08, 2005

The Fumes Must be Getting to Me

It must be the lack of sleep, carbon monoxide fumes, or the ongoing Labor Day hangover but I'm finding myself agreeing with Eric Montarti & Jake Haulk in their article in the Trib today.

Shocking, I know.

Short summary: Tax Increment Financing Deal... in suburban Washington County... on a greenfield... for retail.  The whole thing doesn't pass the smell test right away.

In order to receive a TIF, a developer must show that, if not for the Tax Increment Financing, the project would not be possible.  That argument is much more compelling in urban areas where the costs of assembling a site and remediating marginal site conditions would otherwise drive developers away from "good" sites.  Distressed, blighted, or otherwise economically disadvantaged areas receive the benefits of development, at the cost of revenues that otherwise would not have been collected anyway.  From a public purpose standpoint, it seems much more logical and cost effective to provide for development on existing infill areas, which are connected to the public network of utilities, roads, and services and are proximately located to other development.  Unfortunately, because of the inherent upfront costs, developers will usually pass up urban infill opportunities for the safer (read: less risky and initially cheaper) suburban greenfield development.  A TIF tries to create an up front incentive for developers, leveling the playing field for urban areas and making them competitive against suburban greenfields.    

Which is why this TIF doesn't seem to make any sense: the developer is already choosing a significantly safer site than, say, Homestead, and one would expect the return on investment to positive with or without the TIF.

Something's wrong. 

I can only assume that either (a) someone is tweaking the numbers to show that this project is infeasible without the TIF, which would be fraudulent, or (b) the long term cash flow of the project IS infeasible and needs the abatement to offset future losses.  If the second assumption is true, this is a bad project right off the bat, and should be quietly disposed.  If the first is true, somebody better look at the numbers again. 

At the end of the day, it will be the municipality that will have to flip the bill for the expenses related to increased greenfield development (additional Water, Sewer, Utility, Police & Fire Protection) and the residents themselves that will have to bear the burden of increased costs of living (increased traffic, pollution, environmental destruction, commute time, etc.) without an obvious public benefit (remediation of brownfield, elimination of blight, return of tax delinquent property to the tax roles, etc.).

But anyway, it's good to see that by calling this a BAD TIF project, the Allegheny Institute is open to the possibility of a GOOD TIF project.  Now if we can only get them to relocate to 240 Forbes Avenue....

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