In my county we have an issue with tax increment financing (TIF).
As of 2014, almost 20 percent of our property taxes go into multiple TIF funds instead of the appropriate taxing units. Our school districts, libraries and general funds lose millions every year to the specially carved out TIF districts, which are supposedly “creating” economic development.
In general, though, our county’s method is not to create but to chase economic development. If an area looks as if it will grow, the local municipalities rush to install a TIF for the area so they don’t have to share any newly generated property taxes with other taxing units.
The original idea of TIF was development wouldn’t happen but for it. In our county that’s not the case. Rather, they create a TIF because: 1) the municipality gets all the revenue; and 2) there is less oversight of spending.
State and local politicians have convinced the public that it is not real taxpayer money being spent, it’s only TIF money. I fear they’ve convinced themselves as well.
I am confident if more people understood how our taxes were determined, they’d pay more attention to the rampant TIF abuse in this state.
The tax rate you and I pay is wholly dependent upon the total of the net assessed value of a taxing unit. What a TIF does is carve out that net assessed value to go into a different pot.
However, it does not reduce the amount of money needed to fund essential services. In fact, most often all it does is increase the burden on essential services without an offsetting increase in assessed values to balance the tax rate.
The gross assessed value of the county is total market value of all parcels. Net assessed values are the gross assessed value minus TIF, exemptions and credits. So when the levy goes up and net assessed values go down, the tax rate goes up. This is why TIF is a big deal. It is why circuit breakers, an accounting correction for all of that, have become a big deal.
My pet peeve is to hear an elected official or lobbyist call the circuit breaker a loss in revenue. It is not, and to consider it as such means that he or she considers your pockets infinitely deep. “If not for those blasted circuit breakers, we could do X, Y and Z,” they might say.
But that money should never have been theirs in the first place. The circuit breaker merely alerts us to the fact that someone is overspending by such-and-such an amount. That should cause government to reevaluate its wants and needs (I’m being serious here; no laughing).
In any case, there will soon be wailing and gnashing of teeth in the legislature to relax the circuit breakers. Don’t fall for it.