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Thursday, October 11, 2007
The Cincinnati Tax Scam?
Posted by The Dean of Cincinnati
Photo courtesy of here.
Each election year, campaign rhetoric reaches a frenzied pitch about the “property tax rollback.” The issue allows politicians to stump about whether Cincinnatians deserve a tax break, or whether we need to do what it takes to keep things like swimming pools open. However, the concept that any of these politicians—or the corporate media outlets in town—really care to inform voters about Cincinnati taxes is absurd, as soon as we remember that the entire City council voted to raise taxes so Corporex could have a $30,000,000 parking garage, and that The Enquirer didn’t bother to inform anyone about this.
Here is some rhetoric from a story in today’s paper:
Cincinnati property owners might not get that average $1.39 tax rollback after all - and the money might instead go to keep city swimming pools open longer.
A resolution to set property tax levy millage was on City Council’s agenda Wednesday, two days after a vote of council’s finance committee indicated five council members - a majority - favored giving the money back to taxpayers. To generate the same $29 million the city got last year, the millage would roll back from 4.57 mills to 4.53 mills.
But Mayor Mark Mallory held the resolution after asking to talk to some council members about changing the plan to keep the money, which would add up to more than $234,000.
(...)
Supporters of keeping the money say a policy that sets revenue at the current $29 million doesn’t allow for inflation. Opponents say that taxpayers deserve any breaks the city can give.
On August 1st, City Council unanimously passed “emergency” ordinance 0300-2007:
According to the actual language of the ordinance (which can be downloaded here), these “Economic Development Bonds” will be used to offset costs for a garage to Corporex, and funds will come, in part, from raised taxes:
So there you have it. Voters against tax increases are being encouraged to have the discussion relative to neighborhood swimming pools, which are more likely to service kids in poor neighborhoods. Those are the kinds of options we are given. And all of City Council is at least partially complicit.
When it comes to securing funds for corporate giveaways, voters are not informed, taxes are raised, and no one talks about it. But when it comes to providing services to people, we find ourselves in the midst of a frenzied debate about taxes.
Where is the frenzied outrage about having our taxes raised to support a corporation? How many Cincinnatians, if given a choice, would prefer their taxes go to swimming pools than to an expensive parking garage for a corporation?
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11 Oct 2007 at 11:00 pm | #
Do your homework better!!! If you read all the documents that you link to including the ordinance and the transmittal you will fine that the sale of bonds for the Baldwin building is to be paid back from tax increment financing from the project and the TIF district in the direct area. They refer to it as Tax incetive revenues (same thing). Anyway the ordinance is generic in that it allows for both a pledge of general obligation of the City’s credit if needed OR a pledge certain revenues… in this case TIF dollars.
Since this project is using TIF dollars per the transmittal the general obligation pledge does not apply and since it doesn’t apply the paragraph you cite above also does not apply… ready the section of the ordinace it is included in to see this point… therefore the City is NOT raising taxes to support the garage.
No instead the City is using TIF dollars to build the garage… now what is TIF you might ask… well if you don’t know that by now then you don’t deserve to be a cynic of city government spending. If you need the answer to TIF respond to this post and I will explain it more. Suffice it to say that this project basically pays for itself, benefits the surrounding community and is secured by existing tax revenues in the surrounding community. WIN WIN WIN.
12 Oct 2007 at 04:36 am | #
Sounds pretty easy to understand to me. Provide quotations to support your claims. Don’t change the subject. Thanks.
12 Oct 2007 at 11:20 am | #
TIF revenues still come from tax dollars. Even if all the money were to come from TIF tax dollars, why should $30 million go to Corporex?
Second, there is no way that TIF will generate that kind of money, even in good times. General obligation bonds will be sold because that is they only way the city will get that kind of money. This claim of saying well, maybe the city won’t have to issue general revenue funds because it’ll find the money somewhere else, is about as likely as pigs flying.
Finally, TIF revenues depend upon increasing property values. Has anyone looked at the real estate market lately? All those TIF revenue projects are going down the toilet.
12 Oct 2007 at 11:15 pm | #
TIF is like four people going to dinner and only three of them pay. This well intended program has been hijacked by developers and is a great marketing tool to sell condos. Isn’t it Chris?
13 Oct 2007 at 03:41 pm | #
Dean,
Your easy to understand quoted section is taken out of context and that makes all the difference. It is actually preceded by the following phrase:
“To the extent that the Bonds or Notes Pledge the Issuer’s full faith and credit...”
After that section of the ordinance there is another section of the ordinance that states:
“To the extent that the Bonds or Notes are secured by revenue...”
Now, this is a TIF deal, so it is secured by revenue, so the second section applies not the first.
Why don’t you admit that you don’t know what TIF is and I will take the time to explain it. From all of the comments above I can see that NONE of you truly understand TIF. That is unfortunate since your ignorance is fodder for your unfortunate rants against projects that benefit the community.
13 Oct 2007 at 06:35 pm | #
Anon 3:41,
Please explain what a TIF is so we might understand. Which projects do you refer to when you claim benefit the community. Ask the landlords in Clifton and Walnut Hills the extent of benefit they received from TIF projects like the Czechoslovakian Barracks on Calhoun or the McMillan Manor. How many tenants have been stolen from this community? How many shitbox condos can one town support? With a condo developer on City Council I guess we will find out. What a pathetic state of affairs when we can take two treasures like St. George Church and Hughes High School and stick such an unimaginative piece of crap in the middle. Looks like it was designed by accountants and lawyers.
13 Oct 2007 at 09:30 pm | #
.
Tif - Tat, what difference does THAT make ?
The point is priority, they found $ 30,000,000 in corporate welfare and grand-stranded children by cutting $ 2.5 mil. for community services !
Nuf said, or do we need to explain: HypocRits and the ‘fanatical five” ?
Trump and Dump the ‘fanatical five”
YOUR FIRED !
.
14 Oct 2007 at 10:18 am | #
Freedom Fighter,
Understanding TIF does make a difference because TIF dollars actually do not compete with funding for community services. They are two separate pots of money. TIF stands for Tax Increment Financing. The key word here is increment. It is a tool to spur development. When there is a project which involves millions of dollars of investment, TIF captures the incremental tax revenue derived from the proposed project investment. The fact that it only captures the increment of the project itself is important because that means that it does’t affect the existing taxes which do go to things like social services. You might now complain that this increment should go to the social services instead of the development, but here is the point… the increment is NOT going to be there UNLESS the project gets built. Therefore the TIF allows a project to be built like the Humana development and that benefits the community because of the jobs it creates and the money these new employees spend in nearby businesses. Also, once the term of the TIF expires ALL the tax increment goes to the taxing entities for things like social services.
So TIF allows projects to be built which create jobs or housing which benefits the communities and the project ultimately does give back direct taxes to the taxing entities when the TIF expires. Absent TIF the project would most likely not be built and then no one benefits.
Another point of clarification, to the four people going to dinner and only 3 pay… that is not true, with TIF the building owner does pay the same tax amount as nearby neighbors the difference is that a portion of it goes back to project itself to public improvements related to the project (in this case a garage) and the remaining portion goes to the school board. Bet you didn’t know that.
Hopefully you all now understand TIF so you don’t continue to spread misinformation that the city gives $30 million to Humana and that this money should go to social services instead… because it just doesn’t work like that. Also think about where the $30 million comes from… not the city’s coffers but from the project being built by Humana. This money wouldn’t exist BUT FOR the project being built. So yes the city “found” the money, but it was from the corporation’s investment itself.
14 Oct 2007 at 06:59 pm | #
Generally not true. Most of the TIF’s in the city come from so-called area TIF’s, where an entire neighborhood is put into a TIF district. Most of Walnut Hills, for example, is in an area TIF. The tax revenue from an increase in property values—due to whatever reason, even just inflation—goes into the TIF pot. These revenues would have been available for social service programs, but the money got intercepted.
There are also so-called project TIF’s. These are less significant in Cincinnati. The claim is that the project would not have happened unless the tax money is recycled, via TIF, back into the project itself. Well, first that is an admission that tax rates are pretty high in this area. Second, the rest of us wind up paying for the taxes that do not go into the general fund (and which pay for social services). Third, maybe another project, which would have paid their fair share of taxes, would have been built but was scrubbed because they couldn’t compete against one of the favored getting special treatment.
I used the example of the $30 million subsidy to Corporex when I spoke at the Greenwich and at the Douglas school in Walnut Hills. Corporex is off of I-71, just down Gilbert Avenue from Peebles Corner. Their subsidy helps them build a new office building. Peebles Corner has plenty of old buildings that could be used for offices. But why should someone spend a few hundred thousand fixing up an old building or two in Peebles Corner when just down the street someone else is getting $30 million from the city? And if that $30 million all came from the property taxes that Corporex would have paid to the city (as laughable an idea as pigs flying), why not give the same deal to everyone? But a level playing field is not the objective—that’s why not.
14 Oct 2007 at 09:46 pm | #
MEP,
Not true. Most of the TIFs are project based TIFs. While the TIF districts have been set up, there are only two deals actually set up from TIF districts. So the statemaent that most TIFs are from TIF districts is not true.
The $30 million TIF deal is to bring jobs to Cincinnati for Humana, not to benefit Corporex. Also anyone who does this type of investment can apply for project based TIFs. So the same deal could be “offered to anyone”. By the way, it is not as laughable an idea as pigs flying. TIF is a wonderful financing tool.
Also this revenue would NOT have gone for social services, because of City Council’s tax rollback the city can’t collect the natural increases in property values. Also the schools are the same way, their levy levels are fixed so they don’t get the benefit of the tax appreciation. However with a TIF deal they get a direct payment of between 25 to 27% of the property tax values. A little know fact is that the schools like this arrangement since they benefit financially from it.
I think you and others on this site don’t want to understand what I am saying because it takes a lot of the wind out of your sails when you learn the truth. And now that you know the truth you will probably just ignore it and keep on ranting and raving spreading misinformation to get votes. That is unfortunate.
15 Oct 2007 at 12:08 pm | #
well that falls into the no shit sherlock category.
Doesn’t TIF financing only account for the increased value? If there was no increase in value then there would be no increased taxes that the rest of us have to pay.
Maybe but not likely. do you have an example in this case of what would have happened on the same site that was squeezed out by this. If you do you have a point if not you don’t
16 Oct 2007 at 12:30 pm | #
Take a look at this earlier Beacon story on a Madisonville office project.
There is a huge difference in subsidies here. There is also the problem for TIF supporters of explaining why one TIF project got so much less than another TIF project.
Look, it’s not like investors have to come to Cincinnati. They can choose to invest in Northern Kentucky, in Warren, Clermont, or Butler County, or in Indiana. Once the city starts inserting itself into the free market and saying this person gets a handout, this person get a tax abatement, this person gets special treatment, and the rest of you will pay for it, it drives away the investors who do not receive special treatment. They will go where the playing field is more level.
16 Oct 2007 at 12:43 pm | #
I, for one, would disagree that a parking garage for an office building is a “public improvement.” It is a private development, owned by a private company, for the primary benefit of a private company. Revenue collected from the parking garage will go to a private company.
As for the portion that goes to the “school board” (odd way of saying it), the portion is much less than what would have gone to the public schools if they did not have TIF’s.
True, companies with lots of money sometimes—but by no means always—get similar deals. There is a vast difference in the deals, and there are no set rules as to who gets what. It’s all in whom one knows.
If you disagree with me, show me the rules and show me the worksheet calculations that went into determining the subsidy for Corporex. Show me the agreement that states that the revenue from non-business cars parking in the garage (for which the taxpayers paid) is returned to the city.
And the small to medium-size investor has NO CHANCE of getting such a deal as Corporex got. City council has basically put out a sign saying to those investors Keep Out!