Cut taxes for developers or raise taxes on everyone else? Oh -- and Blight, too!COLUMBIA, Mo 12/17/13 (Beat Byte) -- Columbia city manager Mike Matthes (left) has closed downtown Columbia to all new development, blaming lack of funds to upgrade electric, sewer and other infrastructure.Matthes' fix: get the money by CUTTING taxes with a large-scale developer incentive called a Tax Increment Financing, or TIF, district.Among developers hung up by the "Closed" sign: Park 7 Group, which wants to build a 24-story high-rise apartment building across from Peace Park; and real estate giant Tom Mendenhall, who owns Columbia RE-MAX Realty.
"There can be no more development downtown," Matthes told reporters earlier this month. "The pace of development in the area has outstripped the electric and sewer capacity, which is 100 percent utilized. We can't build anymore, no matter what size."
The problem is "bizarre," some say, because they cannot understand how City Hall approved hundreds of units of student apartments, from Walnut St. all the way to Mizzou, without seeing the infrastructure problem coming.
And why isn't November's $32.5 million bond issue fixing downtown sewers? It isn't, which "is a surprise to a lot of people," Mendenhall told reporters.
Matthes' tax-cutting solution is considered more bizarre because the alternative, he says, is to RAISE taxes and city fees. "It would be a significant tax increase," Matthes said.
Matthes likes the TIF idea -- which would cut taxes on developers -- because "tax fatigue makes it unlikely residents would go for more fee or tax increases to pay for needed infrastructure," he told reporters. Mayor Bob McDavid and First Ward Councilman Fred Schmidt also "support using TIF to come up with funding for the infrastructure improvements."
The problems with TIF are many: It cuts property and sales taxes, but only AFTER improvements to existing buildings or new developments are constructed, which creates a cart-before-the-horse problem.
The improvements must be built BEFORE the tax break to finance the infrastructure, but the improvements cannot be built without the infrastructure. "Any increase in taxes generated by improvements to the property or more sales on the site are diverted to a TIF fund," according to this story. The TIF fund presumably pays for the infrastructure.
TIF districts also require a legal declaration of Blight, which would mean the Columbia's downtown would be threatened with blight again.Even Boone County Assessor Tom Schauwecker, known for the developer discounts his office provides, dislikes the TIF idea. "Other options should be on the table to fix central-city infrastructure," he said in a recent interview.Only the historic Tiger Hotel and the new Doubletree hotel currently get the tax break.