Tuesday, September 25, 2012

Tax Increment Financing – an insult to the taxpayers!

Something from our good friend W. G. Davis:

 The proposal by the developer of Gettysburg Crossing, the planned shopping center that would hold a new Walmart Superstore, among other retail outlets, is for the three local taxing authorities to float municipal bonds to cover what was a $6,000,000 shortfall, but now has become an estimated $12,300,000 according to a September 19, 2012 article in the Gettysburg Times.  By the time all is said and done, it could balloon higher still.  This proposal is called Tax Increment Financing [TIF].  This financing is necessary for the developer to complete the shopping center and make changes to existing infrastructure [new traffic lanes on US 30, Shealer Road, water, sewer and gas mains, and the moving of some high tension power lines]. 

The new shopping center would be a boon to the area, in terms of providing a wider variety of stores in which to shop, including a new, larger Walmart [which would provide direct competition for Peebles and with a grocery section that would compete directly with Giant]; more eateries [to compete with Subway, Hoss’s, Gettysburg Family Restaurant, etc.], and supposedly both a Lowes/Home Depot type store [that would compete with the lumber/hardware store at the edge of town on York street], and a BJ’s type store [that would compete with nearly all of the above]. 

And those required infrastructure changes surely would be nice to have in place…if the shopping center is built.

But along with the benefits comes the downside. 

Number one on your hit parade list is taxes.  As the new stores open, revenues from the property are taxed at higher rates as the revenues increase.  It is these projected increases the developer wants the County [AC], Straban Township [ST], and Gettysburg Area School District [GASD] to float the bonds to cover.  Normally, these increases would be part of the operating expenses: overhead costs of the developer/property management company, and retail stores.  But by replacing those increased taxes with 20 year bonds, the three taxing bodies [GASD, ST, AC], would get their taxes spread out over a twenty year period until the bonds pay off.  Thus, the $6,000,000 or $12,300,000, or who knows how many millions more dollars in infrastructure costs that are to be paid by the developer, will be transferred to the taxpayers, and those taxpayers will see increases in their township, county, and school taxes.  Therefore, every taxpayer in Adams County will collectively pay the $6,000,000, or $12,300,000, or however many millions of dollars are required to allow this developer to meet his obligations, so he can build stores and make money.

It sounds…socialist.  It is definitely a redistribution of wealth from the Adams County taxpayer’s pockets to the investors’ pockets. 
Additionally, all those businesses impacted by the presence of the new stores will have depressed sales, and therefore depressed revenues, resulting in lower taxes paid to the three taxing bodies. 

And then there is the risk.  Who pays if the economy stays down, or gets worse?  Who will pay the tax bills that people are now already struggling with?

Why are they even talking about it?

Oh, there is more, much more…

How about the legality of a taxing body entering into such an agreement as TIF, when it has no legal standing to do so because there is no interest in doing so?  There is no benefit to be derived by the GASD’s involvement in this TIF.  The school buses will continue over the roads they now travel, the movement of the electrical lines will be of no import to the GASD, and the new water, sewer, and gas lines will not have any effect on the GASD.  So, what standing does the school district have to be involved in this TIF scheme?  What advantage is there to participate?  Participating in the TIF does nothing to improve the standard of education in the school district.  A good school board would recognize that immediately and stop participating in discussions.  Yes, they get an increased funding stream from the revenues down the road, but is the risk of the economy going from bad to worse a smart risk to take?

And really, is it not time for local government to catch up to the rest of the country and start insisting their employees contribute to their health insurance and retirement funds?

Really!

Essentially TIF is corporate welfare.  The taxpayers bail out a company that failed to do due diligence when planning their development and came up short in the money backing the development, so they are begging the taxpayers to do the equivalent of paying for the rope used in their own hanging!  The developer and the retailers get several years of tax breaks that they NEVER have to make up, so their profits will be there right from the start.  And the taxpayer gets to make up the difference for their bad business practice. 

Is this who you want developing commercial ventures in Adams County?  Heck, is this the way you want growth to happen in America?  It is not growth, but rather it is redistribution of wealth.

Yes, the local populace and the visitors to the area, get greater convenience, and wider shopping choices closer to town, saving many trips to York, Waynesboro, and Hanover. 

The developer has little to lose and $6,000,000 to $12,300,000, or more, to gain by this plan.  Agree to the TIF and you reinforce bad business practices by rewarding the developer for those shortcomings with millions of dollars. 

It is shameful that three “elected” taxing bodies [Straban Township, Adams County, and Gettysburg Area School District] are even considering this.  It should have been rejected out of hand.  Remember this on Election Day!

W. G. Davis

W.G. Davis is retired and living in the Gettysburg area.  He is a frequent commenter on local government. 

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