If Charles Meeker does run for a fourth term as Raleigh mayor in 2007, as my sources now tell me he will (and yes, I predicted he wouldn't), a big reason will be to stop the City Council from opening up the cookie jar also known as TIF to their developer pals. I mean in particular City Councilors like Philip Isley and Jessie Taliaferro, either of whom could actually be the mayor if Meeker doesn't run.
Here's the political briefing as regards the TIF—short for tax-increment financing—boondoggle:
Republican Councilors Isley and Tommy Craven say: Bring it on. They want, as Isley puts it, a "wide open" policy.
Democratic Councilors Taliaferro and Joyce Kekas don't go quite that far. But they'd use it a lot. Be "pro-active, rather than reactive," Taliaferro says. (Kekas doesn't say much, but follows Taliaferro's lead.)
Meeker and Councilors Thomas Crowder and Russ Stephenson, Democrats all, warn: Use TIFs sparingly, if at all. And use them only where, "but for" the public subsidy, significant private investment would be impossible.
If you're keeping score, that's a likely 4-3 for developers' welfare, with one more member still to be heard from. Councilor James West, a Democrat, seems to be saying "Let's use TIFs only in blighted areas like some in my Southeast Raleigh district." But developers are all over him to drop the word "only" from that sentence, and make it a 5-3 majority.
The (latest) basis for my briefing is an economic development "workshop" held Thursday afternoon by the Council that quickly degenerated into a veiled, but nonetheless bare-knuckled, fight over whether Raleigh should "TIF" developer John Kane's parking deck at North Hills and similar projects in the future.
True, neither Kane, nor his project, nor the $75 million cash subsidy Kane wants from the city, were ever specifically mentioned. No, the debate was instead about "visionary projects" (Isley) and "at-risk areas" (Taliaferro) versus Meeker's fiscal prudence and "minimum standards."
But be in no doubt, Isley, Taliaferro & Co. are trying their darndest to get Kane his money. And Meeker & Co. are equally determined to prevent it.
Isley's view is that developer subsidies are fine as long as the city comes out ahead tax-wise. "Three words," he said. "Net revenue gain.... The point is for the city to make money."
Ahead? an annoyed Meeker as much as said. Is that all you want? The mayor noted that not long after Minnesota enacted a TIF law, St. Paul had lost 8 percent of its tax base to TIFs, and Minneapolis 15 to 16 percent, because property taxes that should've been coming into their general funds were instead paying off developers' projects. "It's become like an entitlement" for every new development, Meeker complained.
In other words, TIFs put you ahead in the same way you'd be if somebody who should've paid you $10 for a job paid you $5 instead. Then the question would be, Is there some reason he couldn't have paid the $10?
In theory, TIFs are a creative way of paying for a public investment that will generate a substantial private one—without raising taxes. The city cleans up a polluted industrial site, say. When it does, somebody can put a new building there. The money for the cleanup is borrowed, using TIF bonds. The bonds are repaid with the taxes generated by the building—that's the tax-increment.
That's in theory. In reality, however, there's no reason ever to use TIFs in North Carolina, according to both Raleigh City Manager Russell Allen and City Attorney Tom McCormick, since the state allows the same kinds of public investments to be financed using COPs (certificates of participation).
What's the difference? Not much. Except COPs get repaid regardless whether the private investment materializes, which means borrowers take them at lower interest rates—at less cost to the city, that is. TIFs, on the other hand—and again, this is in theory—are repaid for sure only if the private investment produces sufficient new taxes to repay them. In fact, Raleigh wouldn't default and jeopardize its AAA bond rating. But the financial markets don't know that.
So why is Raleigh thinking about TIFs?
Perhaps the answer is that a TIF could disguise a "public" investment that isn't public at all—like Kane's parking deck. Isley and Craven liken it to Raleigh's downtown parking decks, which were subsidized for years, but the difference is that they now do make money, because they aren't free and the city owns them.
Kane's deck, on the other hand, would belong to Kane. Or decks. Kane wants the $75 million to supply almost 5,500 parking spaces at North Hills East, where he hopes to sell 1,000 condos or apartments, plus a hotel, a shopping center and 875,000 square feet of office space. In buildings up to 35 stories high.
Wow. Sounds like he'll have the $10.
One other thing. Wake County Manager David Cooke was on hand to underline the fact that the number of new housing units here is growing "phenomenally"—but not manufacturing or other commercial uses. Houses cost the taxpayers more than they pay (think schools), Cooke said, whereas a new plant—now that's a net gain. Which is why the county offers big "incentives" (money) for job-producing plants.
So why would Raleigh want to subsidize 1,000 more housing units, especially in an area like North Hills that'll get them anyway, sooner or later?
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