Tax Increment Financing (TIF) likely to face legislative scrutiny

A tax increment financing (TIF) deal to entice a Von Maur department store to move from Iowa City to Coralville appears to have triggered renewed efforts to reform state TIF laws.

One developer group, the Professional Developers of Iowa (PDI), is warning members about "a strong bipartisan effort to curtail TIF" in the upcoming legislative session, blaming the recent Coralville incentive for the renewed attention.

Two area legislators -- Democrat Sen. Joe Bolkcom of Iowa City and Republican State Rep. Tom Sands of Wapello -- happen to chair their respective chambers' ways and means committees, the place where the authority to make changes to TIF laws would originate.

The two legislators held a public hearing Wednesday (1/4/12) in Coralville to hear concerns over the use of TIF, in particular the use of TIF to entice retail stores to move from one community to another. The hearing attracted a standing room only crowd of 200 people.

Under the arrangement in Coralville, Von Maur is to receive $9.5 million in TIF rebates to entice it to relocate from its current Iowa City Sycamore Mall location to the new Iowa River Landing development.

The Bettendorf City Council, at the urging of the PDI, has already weighed in on the TIF issue. A resolution was passed by the council at its first meeting of the new year without any public input, or any discussion by council members.

The resolution "encourages" the legislature "to leave the use of TIF as it currently exists, except for those uses which clearly fall outside of the parameters originally intended."

The city staff recommendation concedes there are two areas where the city believes it is inappropriate for TIF. Those inappropriate uses would be to grant TIF rebates "to developers to develop high-end single-family residential subdivisions surrounding brand new golf courses" and its use to attract "retail to previously undeveloped green space."

The city of LeClaire has used TIF for new residential development despite opposition from county and school district officials. And, in Davenport, the city recently authorized the use of TIF to attract a hotel/commercial retail development along a prime undeveloped parcel fronting Interstate 74.

Under a TIF, the incremental taxes from the new development/construction is either used by the city to pay for public infrastructure serving the development or those monies are rebated back to the developer. The length of the TIF rebates varies. In Bettendorf, some have been as short as five years, while the TIF rebate involving the QC Waterfront Center/Isle of Capri hotel is for 20 years.

The incremental taxes captured by a TIF not only include city property taxes, but those normally paid to the school district, county or other taxing authorities which levy taxes on the property.

Bettendorf has regularly sought county and school district input prior to establishing a TIF, but state law does not require approval by any of the other affected taxing bodies.

Bettendorf primarily has targeted TIF use for blighted areas in need of redevelopment. However, the city council last year approved the use of TIF for an industrial development of prime real estate along Interstate 74. And, the city has used TIF for residential development, approving a $650,000 10-year rebate to the developer of a senior housing project, Thomas Place, along East Kimberly Road.