United we fail
 On the flight home from Chicago I browsed through the Chicago Tribune. A story that caught my eye was titled "Chicago trying to land United." Surely they weren't talking about United Airlines? The same airline that's been in bankruptcy for what seems like forever and has failed to turn a profit in over 5 years?Does this sentence look familiar? "The city's offer includes $4.4 million in tax-increment financing if the airline relocates downtown, according to a source familiar with details of the plan." Ah, good ol' TIF! Not even Chicago can help itself from offering incentives. Have you been to downtown Chicago? It's a very vibrant, desirable place to be. Why offer incentives for a company to move to one of the most desirable locations in the midwest? Simple. It seems Denver and San Francisco can't help themselves either when it comes to giving away the store. Denver is reportedly willing to up the ante to a cool $9 million. No figures from San Fran but they're definitely interested. This incentive war thing has gotten out of hand. Major cities are battling over a poorly run, bankrupted company in an industry notorious for cut-throat competition, terrible profit margins and subject to highly volatile fuel prices. This is not sound economic development policy in my opinion. Remember Kansas City's deal with American Airlines? Hey maybe United Airlines would be interested in the American Airlines overhaul base? NOT! |
Comments on "United we fail"
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Brooksider said ... (10:34 AM) :
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Mark said ... (8:05 AM) :
post a commentTIF is like drugs for politicians. They get the short term high of PR headlines and ribbon cuttings, but the morning after (months after, years after) hang over of lost support for schools, libraries, infrastructure, etc is devastating.
One of the many problems with TIF is that it is all front loaded to the advantage of business. They dodge paying their fair share regardless of whether or not the numbers in their TIF proposal are realistic. To my knowledge there is no follow up in the city to see if TIF proposals every live up to expectations. I could be wrong.
I think businesses seeking TIF should still pay their full taxes into a holding fund of some sort. Then if after a certain amount of time, the numbers in their TIF proposal prove accurate, they get the held money and the city keeps the interest. If the numbers in the TIF proposal do NOT prove accurate, the city keeps the held money. It would certainly encourage more accurate proposals and probably shorter TIF time frames.
Brooksider,
Believe it or not, some of what you propose is actually in place. The developer does pay the taxes on the increment into a fund. These are known as Payments In Lieu Of Taxes (PILOTs).
Unlike some older TIF plans (see Gateway We Hardly Knew Ye) the present day plans are getting better about clawback clauses which protect the City (somewhat).
You are completely accurate about TIF being addictive to politicians and the front-end loaded aspect.
In my opinion though, TIF is a relatively innocuous economic development tool. The real problem is the 10, 15 and 25 year tax abatements being handed out by the Planned Industrial Expansion Authority, a pseudo-governmental organization made up of mayoral appointees which operates in relative anonymity with little to no oversight. Look for that topic in upcoming posts!
Thanks for reading. -markf