Is YOUR Local Government a BLIGHT on the Community?

This week's Pioneer Press in Cary, IL, a northwest suburb, has yet another story about the blatant use of eminent domain by local officials, robbing a private sector small business Peter to pay a private sector large developer Paul.

We've seen this before.

I wonder if this latest "Disneyland Downtown" scheme is based on yet another consulting study ramped up by former village officials, and perhaps benefitting another group of former village officials who are in the development business. And perhaps a few special interest "non-profits" will climb aboard to "monitor" the whole thing and claim special subsidies for their friends.

Here's the story, "Second TIF district interests developers":

Cary village officials have begun informal discussions with developers about a second proposed tax increment financing district, Village Administrator Cameron Davis said.

Although the TIF district has not been approved, Mid-America Development Partners is already talking about proposed plans for the area.

The good Mayor Lamal says:

"The goal is not to partner with a specific developer but to partner with the developer who can do the best for the village," Lamal said.
According to Illinois law, a TIF district cannot be created until a number of requirements are satisfied, including a redevelopment plan that explains why the area needs redevelopment.

Kane, McKenna and Associates is currently working on that plan for the village, and has been for the past few months.

TIF districts are tools used by local governments to attract growth and development to blighted areas of town that would not be redeveloped without help. Once a TIF district is established, the level of property taxes received by schools and other local taxing bodies from property within the districts boundaries is frozen during the life of the district. As property taxes rise as development occurs, the increased property tax dollars are used to fund improvements within the TIF district.

Harry Ford, whose business falls in the proposed TIF district, has owned Fairway Golf Cars, 150 Crystal St., for more than 10 years.

"Last year was our best year, and I expect this year to exceed that," Ford said. "As far as I know, my (business) neighbors are in the same position. I wouldn't call that blighted."

However, Lamal said he suspects that when the village reviews how the town's property taxes are being assessed, the proposed TIF area will be lower than the rest of the town.

"I don't have any doubt, whether it be this year or in five years from now, that area will be redeveloped," Lamal said.

And he doesn't think it can be done without the help of a TIF district. Problems with infrastructure and flood plains are too much for one owner to take on alone, he said.

"Without the TIF, you'll be looking at the same buildings 30 years from now," Lamal said.

The duration of a TIF district is 23 years, and in that time, land owners in the area will be approached about selling their property. Lamal said he hopes that a combination of efforts on behalf of the developer and land owners will allow fair-market transactions to determine the property's worth. If not, eminent domain -- the forced sale of properties -- is an option.

"It's an alternative at some point in time, but we're a long way from there," Lamal said.

Lamal estimates that a second TIF district would generate between $40 million and $50 million in increased property value. No final redevelopment plans for the TIF district have been drawn up, but Lamal said the area could include high-end condominiums above first-floor retail space, which could house businesses such as a cafe, a deli, a coffee shop, gift shops and boutiques. He also added that although Veterans Park is not currently a part of the proposed TIF district, he hopes that an agreement can be reached that would include improvements to the park, as well.

"In the long run, we can create a better set of circumstances relative to economic development, aesthetics and shopping opportunities," Lamal said.

But in California, where this has been going on for some time (TIFS were first used there in the 50's), the evidence shows that usually the promised increases in sales tax revenue do not come, and has destroyed communities. Steven Malanga in City Journal:

Government ostensibly takes the private property to boost economic development and buoy tax rolls. But a 1998 study by the Public Policy Institute of California found that communities in the state that have engaged in extensive government-sponsored redevelopment have reaped no real economic benefits compared with municipalities that haven’t done so. Government officials, it turns out, often misread the marketplace and promoted projects that failed to deliver the promised payback. “The widespread abuse of eminent domain has left shattered neighborhoods, half-empty malls.

Closer to home, a TIF failed in Highland Park, and now the next generation of city officials is proceeding on an eminent domain takeover a business who took advantage of the original TIF:

The city's motivation to buy the property, Mayor Michael D. Belsky said, is to protect the public investment in downtown improvements and the city's reliance on sales tax revenue instead of property tax revenue to pay for city services.

And from the Castle Coalition:

Highland Park, Illinois – This summer, the city began eminent domain proceedings against Hugh Schwartzberg, the owner of a vacant single-story white stucco building downtown, so that it can sell the property to a different individual who will lease it as the city sees fit.

Nor have TIFs worked in Chicago. According to Daniel McGraw in Reason:

The experience in Chicago is important. The city invested $1.6 billion in TIFs, even though $1.3 billion in economic development would have occurred anyway. So the bottom line is that the city invested $1.6 billion for $300 million in revenue growth.

The upshot is that TIFs are diverting tax money that otherwise would have been used for government services. The NCBG study found, for instance, that the 36 TIF districts would cost Chicago public schools $632 million (based on development that would have occurred anyway) in property tax revenue, because the property tax rates are frozen for schools as well. This doesn’t merely mean that the schools get more money. If the economic growth occurs with TIFs, that attracts people to the area and thereby raises enrollments. In that case, the cost of teaching the new students will be borne by property owners outside the TIF districts.

In most communities, this means the increased costs will be borne by homeowners.
More evidence local governments don't properly analyze the real costs:

“There is always this expectation with TIFs that the economic growth is a way to create jobs and grow the economy, but then push the costs across the public spectrum,” says Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation. “But what is missing here is that the cost of developing private business has some public costs. Road and sewers and schools are public costs that come from growth.” Unless spending is cut—and if a TIF really does generate economic growth, spending is likely to rise, as the local population grows—the burden of paying for these services will be shifted to other taxpayers. Adding insult to injury, those taxpayers may include small businesses facing competition from well-connected chains that enjoy TIF-related tax breaks. In effect, a TIF subsidizes big businesses at the expense of less politically influential competitors and ordinary citizens.

Add to that demands by advocacy groups for subsidized housing for seniors, or other special groups who may add to school enrollment, in the condos above the new retail, and you have additional unconsidered costs.

And what is Illinois' definition of blight? (See my earlier post, Eminent Domain Watch)

In Illinois, governments can use eminent domain to force the sale of private property and transfer it to another private owner if the property is found to be blighted or on its way to blight.

The state has a list of 13 factors that prove blight, such as dilapidated buildings, obsolete uses or code violations.

"In the Chicago metro area, I think we can all agree there are properties that truly are blighted," said Thomas Geselbracht, a Chicago attorney specializing in eminent domain. "Sometimes municipalities try to use eminent domain where there's not quite as much agreement as to what's blighted."

Critics say blight definitions are written in a way that allows city councils to use the power of eminent domain by citing issues such as cracked sidewalks, buildings older than 30 years, or the lack of a community plan when a place was built.

IN EFFECT, ANY OLDER COMMUNITY

Two Illinois State Senators, Susan Garrett (D-Lake Forest) and Dan Cronin (R-Elmhurst) have introduced legislation, SB 3086 the Equity in Eminent Domain Act, to tighten the definition of blight and strengthen protection for ordinary citizens.

Some municipal officials have, not surprisingly, expressed opposition to protecting their own citizens from eminent domain abuse. Ask your elected officials where they stand.

Do it today.