TIF opponents looking
for gotcha moment

Tim Stuart, a representative from the Boulders Inn and Suites, which wants to build a 31 room, $1.5 million hotel in Atlantic met with the city council Wednesday night and I believe opponents think they have already found that “gotcha” moment that will doom the project for a second time.
Stuart met with the council to re-introduce the idea the community after the council, perhaps inadvertently, drove the project from town by rejecting the company’s $295,000 tax increment financing (TIF) request. That money would have been used to pay for infrastructure improvements.
Last October, by a vote of 4-3, the council rejected the company’s initial request after the majority of the council felt the project should be financed through a tax rebate program rather than TIF. But the project is back thanks, in part to a new council and mayor, along with what Stuart said were many calls from residents. The council took no action on the proposal and will have to deal with a number of procedural issues before officially considering it in March.
But already some familiar arguments are popping up. Councilman Kern Miller, one of the four that voted against the original proposal, asked if the tax rebate idea was on the table, even though that question seemed to be answered last October.
He also made the somewhat bizarre request that the city be included as a partner in the project if it agrees to provide the TIF financing. Not surprisingly, Stuart seemed less than enthused with that idea.
But it seemed to me that opponents feel their real ace in the hole is going to be a feasibility study conducted by Iowa State for the business. Miller, seemed to insinuate that the report was being kept secret, despite the fact that at least one former city councilman had the study in his possession and showed it to me.
A feasibility study is just what its name implies, a study to determine the feasibility of the project. They typically include an appraisal of the particular business conditions, perhaps an evaluation of the need for the business and, often, possible methods of financing the business.
In this particular study it says nothing about using TIF financing for the project. And there it is… GOTCHA!
The feasibility study is a red herring and the opponents know it.
Stuart, perhaps anticipating the question that is sure to come, answered it Wednesday noting that since the study was completed, things have changed and other choices have been made. And that really is the point. Feasibility studies aren’t business plans and they aren’t carved in stone. Yet I believe that there are those who will point to this and say “See, your own study says you don’t need our money.”
Maybe they’re right, and maybe they aren’t, but that’s not the point. The point is, is that the developers have come up with a different plan, a plan, I assume, they feel will work better for them. And that is the plan that has been submitted to the city council.
It’s a little like you and your wife deciding to buy a car and then sitting down and deciding how to go about it. You could go to a bank and borrow the money, finance it through the dealer, borrow the money from relatives or get a second job to pay for it. If in the end you decided to go to the bank for a loan, you would no doubt be surprised to be turned down for the loan, because the banker found out you had looked into other options. Perhaps even considered them. No, the bank will evaluate your application based on your credit history and how much risk you bring to the table. Not your thought process.
It’s not the council’s job to set up the financing for the project, it’s the council’s job to consider the plan put before them, not a fantasy plan that may or may not have ever existed. If they don’t feel confident with the proposal they should reject it, but they’re not investment advisers and it’s not their job to take on that role.
The fact is, under the proposal submitted to the city, the numbers, at least the ones the city cares about, are in line. According to city officials the project is expected to raise around $54,000 a year in tax revenue when completed, an amount high enough to cover the estimated $45,000 bond payment. Company officials will also have to agree to a minimum assessment to guarantee enough money will be raised to cover the bond.
That’s important because under a TIF program the money is often loaned to a business up front and the subsequent bond and expenses are paid off through the increase in property taxes.
Miller and others have complained that the city will have to cover payments on the bond in the two year period prior to the business coming onto the tax rolls. But they ignore the fact the money will eventually be repayed, all of it, through the increase in property taxes.
Opponents like to argue that under a tax rebate the city would not have to cover that expense. But that is an idea that has already been rejected by the company, they simply aren’t interested in it. Opponents like to paint the issue as if there are but two choices here, TIF and the tax rebate. But there is a third and that is the company decides to do nothing at all, an option the company has considered once already.
Like it or not providing incentive to spur new development is here to stay. You may oppose that philosophically, but in practice it’s the way the game is played. Business will follow the money and in order to be competitive Atlantic will have to play the game. The good news is that with careful consideration it is a game that can result not only in increased property tax valuation but new jobs and an additional economic stimulus to the community. And that’s the kind of “gotcha” we should be focusing on.