Friday, January 13, 2006

TIFs, etc.

JP had this post on this article. I was posting to his comments until I realized that I got a little... ahem.. verbose. So here's what I was thinking:

The important point in the article comes from former Fort Worth City Councilman Clyde Picht:

The original concept of TIFs was to help blighted areas come out of the doldrums and get some economic development they wouldn’t [otherwise] have a chance of getting...
Local areas such as, say, Robinson Township fail the "but for" test cited with Chicago: with rising property values and a demand for development, the TIF is just a political ploy to an areas that doesn't really need it. My opinion: Pittsburgh should have TIFs, the Mon Valley should have TIFs... but that's about it. Sorry South Fayette.

Further, the value of the TIF, ideally, is to bring some competive advantage (or at least leveling) to truly blighted areas in which development is truly difficult (for physical reasons). If East Bloodynowhere, WI starts using TIFs, the value of the incentive decreases to the point where development in the blighted areas is no longer competitive to the "blighted" areas. And we're back in the same position as where we started.

The result is a bidding war is an escalating game of chicken, in which rational actors make themselves worse off than if they did nothing.

Now, the question becomes: how do you make everyone happy within, at least a region, and end the insanity.

The only solution I can see is sort of what they did at The Waterfront, in which three municipalities (Homestead, West Homestead, and Munhall) agreed to revenue and service sharing. Basically, if development happened on the West Homestead portion of the site, Munhall would share in the revenues. This idea works in small areas, but not at the regional scale... and someone smarter than I needs to think about it hard, before the competition overwhelms us all and we pour zillions of dollars into developments that are just going to cancel each other out.

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