Nearly two years ago I penned a column describing my quest to purchase football cleats for my then-14-year-old son. In it I criticized the use of tax-increment financing to subsidize a new DICK’S Sporting Goods store in Muncie.
Though it would seem self-evident, I tried to explain that subsidizing a new sporting goods store in Muncie would not increase the local demand for sporting goods. As a consequence, both of the competing sporting goods stores already in the area would see lower sales and risk closing. That is simple economics.
Within days of writing that column, I, my research center and Ball State University came under a firestorm of criticism from the ‘Friends of TIF.’ During the next 18 months, these special interests unleashed their lobbyists onto legislators, authored factually challenged op-ed pieces and rode the circuit of city, county and redevelopment commission meetings mal-explaining TIF. Altogether these folks have spent hundreds of thousands of dollars beating up Ball State and Legislative Services Agency research while trying to make sure the TIF gravy-train kept on rolling.
Now, part of this is my fault. You see, I naively thought that the economic development community and its well-heeled consultants would support prudent changes to TIF. I assumed they’d want to protect taxpayers and local schools while preserving the many benefits offered by a well-designed and thoughtful use of tax increment financing.
I was mistaken. As it turns out, consultants led by Barnes & Thornburg, Umbaugh and Katz, Sapper & Miller don’t want to see any changes in TIF. The status quo is far too lucrative for them to be troubled with school budgets or those pesky taxpayers.
As I’ve written before, in the rush to bolster their argument, these folks even commissioned a study of TIF. They hoped it would discredit research done by my center and the Legislative Services Agency. But much to their dismay, what they got was a solid effort by the professors at USI. That study reported TIF costs of about $33,000 for each new job, each year, for 25 years. Perhaps they should have hired one of the aforementioned consultants who have never, ever, ever seen a TIF they didn’t like.
Still, the “Friends of TIF” do make one claim that merits taking seriously. They argued that we should ignore the academic studies and just see for ourselves all the good things TIF does. So, in fairness to their suggestion, I did just that earlier this summer. I was on a quest for sports gear for my now 15-year-old son. The results were eye opening.
Because the Muncie Redevelopment Commission lured DICK’S Sporting Goods to town, shopping for sporting goods was a lot cheaper this year. You see, both of the older sporting goods stores in Muncie were in the midst of ‘going out of business’ sales. That’s right, the DICK’S TIF deal managed to close not one but two competing stores in less than two years. I imagine it’ll be more expensive to buy those shoes next year, when DICK’S Sporting Goods has a local monopoly.
Still, the loss of two businesses to the misguided and heavy hand of government isn’t the biggest problem. Due in large part to TIF, Muncie Community Schools doesn’t have the tax money to fix the historic fieldhouse, repair the pools or keep buses running. But to be fair, the deal didn’t leave everyone worse off. Barnes & Thornburgh made a killing on the bond deal.
Michael Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to firstname.lastname@example.org.