Traverse City Record-Eagle

September 19, 2012

Editorial: Opening process ensures accountability


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---- — Traverse City has gotten a lot of mileage out of the state's Tax Increment Financing law, including streetscape work along Front and State streets to make them more pedestrian-friendly, streetscaping on Union and 8th Streets and many other projects.

The scope of future TIF projects may soon be sharply curtailed, however, even to the point where — without some cooperation from other taxing authorities — it may not make any sense to go forward at all.

After years of seeing taxes that would normally go into its coffers siphoned into the city's two TIF districts, Grand Traverse County says it intends to invoke a 1994 state law to demand a contract with any new or expanded tax capture district (some townships are planning their own) to limit the length of the agreement and how much can be captured, or even to walk away.

Under TIF, the taxable value of properties in a district are frozen for most taxing jurisdictions like the county or the Bay Area Transportation Authority. Any new revenue generated by increases in property values from inflation and new construction over the years are "captured" by the TIF taxing authority, which in Traverse City has been the DDA. Captured funds are usually invested in public infrastructure projects that the city hopes will encourage new development.

Last week the county board voted to demand a contract with any new or expanded tax capture district to limit how long it will exist and how much in taxes can be captured or even if the county will allow its taxes to be diverted in the first place. County administrator Dave Benda will negotiate an agreement that protects special millages from tax capture — such as a levy by the county Commission on Aging — and whether the county chooses to participate.

The agreement also will identify projects to be funded by the tax capture, provide a project end date, and require any leftover funds be returned to the county.

This gives the county and other taxing authorities whose increased taxes have been siphoned off over the years a lot of say over what the city wants to do with the money. For entities like BATA or Northwestern Michigan College, that will seem only fair; it's their money, after all, and at the least they would want to decide whether to contribute to a plan or not.

It will also make the city be much more specific about the projects it wants to undertake with an eye that it will have to defend that project for its wider economic impact.

Benda said the county expects it will take a lot of collaboration between the city and the county to agree on TIF projects. He said that if a project is seen as reasonable and of general economic benefit — as have many past TIF projects — it could well get county support. He expects much cooperation on future projects.

There is nothing wrong with other taxing entities weighing in on TIF projects; in fact, if they have the ability to opt in or out, they have a fiduciary duty to make good choices. And crafting a project that has tangible economic interest to not just Traverse City but every taxing authority that could see its revenues eventually rise as new construction comes on line will be in everyone's best interest.

There is speculation that Traverse City's TIF II district — which captures $137,000 from the county's general fund every year and is due to expire in 2016 — will be extended; the DDA says such talk is premature.

This is all taxpayer money, after all, and the more oversight and collaboration before a project is undertaken the better.