TIF’ed Off

Is tax increment financing corporate welfare, or a boost for poor neighborhoods?

It’s the biggest corporate giveaway you never heard of. Tax increment financing, or TIF, could well be the most egregious handout to big developers like Paul Allen and the Samis Land Corporation to snake through the state Legislature in years. Or it could be a way to fund affordable housing, spur economic development in blighted areas, and keep Washington’s economy moving. It all depends on who’s telling the story.

Under a bill before the Legislature, sponsored by Democratic Southeast Seattle Rep. Eric Pettigrew, a city or county could create a TIF district by drawing a line around an “underdeveloped” area, using up to $1 million of its own money to finance bonds to pay for infrastructure improvements in that area. The state would kick in another $1 million per project out of sales-tax revenues that would ordinarily go to the state’s general fund. A Seattle lobbyist estimates that the $2 million would allow a city to finance $25 million in bonds for improvements.

Still following? The city would pay back the bonds by skimming off “excess” sales taxes within the TIF areataxes over and above the amount of taxes collected the year the TIF was created. For example, if an area had no sales taxes when it was created because there were no businesses there, then all sales taxes collected over the life of the bonds (say, 25 years) would be used to pay off the debt. In this way, money that would ordinarily go into the city’s general fund would be diverted to pay for roads and other improvements in one part of town. The more TIFs there are in a city, the more money gets diverted out of the general fund to pay for the improvements.

Cities like TIFs because they see them as a way to “generate revenue” while encouraging business development. The problem is, a TIF isn’t a license to print money. In fact, opponents argue, TIFs often subsidize developments that were going to happen anyway. “You’re not creating new revenue,” says University District activist Matt Fox. “You’re simply moving it around within the city.” Since city budgets and sales-tax revenues tend to grow every year anyway, the argument goes, diverting money from the city’s general fund can blow a hole in a city’s budget. (Last year, the city of Seattle had a $60 million deficit without any TIFs.)

Who could benefit from TIF? How about everybody’s favorite punching bag, Paul Allen? Although legislators say Allen is sitting out the most recent TIF debate, his 45-acre biotech-campus-to-be in South Lake Union seems primed for a TIF-aided “redevelopment.” A TIF around Allen’s property could help pay to widen Mercer or build a streetcar by capturing sales-tax revenues from new business development in South Lake Union.

Another potential winner if TIF passes is Boeing, which owns 150 acres of “surplused” land in Renton. Developers are already cooking up uses for the land, including a bizarre scheme, dubbed “Explore Life Together,” that will “nurture the interplay of imaginations,” apparently by creating a kind of creative community for scientists near Lake Washington. And back in Seattle, TIF opponents have zeroed in on Samis Land Co.’s plan to “redevelop” Pioneer Square with new housing units and offices; Rep. Maralyn Chase, D-Edmonds, says both projects are likely TIF contenders.

But if TIF looks to its opponents like a big Valentine to Paul Allen, it looks like salvation to affordable housing developers like South East Effective Development. SEED’s director, Earl Richardson, would like to develop a vacant 7-acre plot on Rainier Avenue into a mixed-use retail and affordable-housing development, but says he needs help putting in the necessary streets, sidewalks, and sewer lines. “We feel confident that the kind of project that we’re working on would fit” into the parameters of TIF, Richardson says.

But SEED and other nonprofits will have to go up against some powerful players if they want to see a dime of the state’s TIF money. The program, limited the first year to $5 million statewide, will be funded on a first-come, first-served basis. Unfortunately, nothing in Pettigrew’s bill prevents Paul Allen from bellying up to the TIF trough ahead of small-time developers like Richardson. Sen. Adam Kline, D-Seattle, who supports the TIF legislation, says legislators “have to trust that city governments, when they set up a TIF area, are going to have the public interest in mind.” Pettigrew believes public scrutiny should keep abuse to a minimum. “The public has an opportunity to come in and say what they want. It’s not going to be created in a vacuum,” he says.

Richardson, laughing, acknowledges the conundrum. “That’s the politics of this,” he says. “We’re going to have to go in and make a case for why our area, or this particular project, is deserving of this.

But the Seattle Displacement Coalition’s John Fox predicts TIF will be “the nose under the tent” for big developers. “It will be taken advantage of exclusively by the big shots, and there won’t be much left after they tap it,” Fox says.