This commentary is by Charles Simpson of Burlington, a Progressive Party candidate for City Council.
Let’s deconstruct the mayor of Burlington’s recent announcement.
First, it is not predicated on any approved design for the hole in the ground. We only know that (developer Don) Sinex has proposed a downsized project, has rented Macy’s to the school district, and has rejected replacing any public parking beyond that needed to accommodate his expected residential occupants.
Thus the project. will have no positive impact on auto access to retail stores, restaurants and offices while adding commercial congestion.
Is the planned development “free” to taxpayers, as the mayor’s press release states? No. The state’s explanation of tax increment financing says:
“Current statute requires that the municipality pledge at least 85% of the incremental municipal property taxes to the TIF debt and a maximum of 70% of the incremental Education Property Tax.”
Residential taxpayers in 2021 pay roughly two-thirds of their property tax to the Ed Fund. For 20 years, 70% of the incremental value in the entire downtown district, larger than the portion that would be enhanced by the developer and by city investment, will repay the city’s debt created by the TIF.
That means that for 20 years, or until the city’s TIF debt is paid, the state’s Ed Fund won’t be getting 70% of the increased tax revenue from the district. The bankers who loan the city money for project-associated streets and sidewalk improvements will get it. Residents will have to make up the difference if they want additional public improvements beyond what TIF pays for or to simply keep up with maintenance. Thus, over two decades, the municipal budget will increase and so will the municipal side of the property tax.
When construction is finished, where will we taxpayers be? We will have paid Sinex $4.3 million for the roadbeds within the Sinex development; we will have paid the full cost of building the two roads that exclusively service the Sinex development (other large developers pay for their roads themselves); and we will have new construction we may not like, since the Development Review Board has a history of approving all large developments.
Had there been no TIF, normal increases in property values would have delivered two-thirds of any rising tax revenue to the Ed Fund for 20 years. The Ed Fund is apportioned around the state, including to Burlington, so Vermonters will get less school aid than with non-TIF development.
While the state anticipates the property values in the entire downtown TIF district will increase over 20 years from $170 million to $290 million, there is no guarantee this will happen. In fact, Covid-19 tells us that a municipal economy can collapse unexpectedly. In such a case, taxpayers will still owe the banks what the city borrowed to give the developer the streets and sidewalks that are essential for access to that project.
What’s the bottom line? In the long run, property values can be expected to increase over 20 years, if only due to inflation. But a TIF diversion of incremental tax money to the bankers depletes the flow of statewide education funding, instead channeling subsidies to the developer and adding borrowing charges.
But in the medium term, commercial property values are eroding and the economic engine of Church Street is weak: paving needs replacement; stores and restaurants are vacant; more structured parking will be required to support any economic resurgence.
It is unlikely that the forecast of $4.3 million in annual incremental taxes after 20 years will materialize. Any civic improvements and the social support costs (police, fire trucks, school rooms) brought by the development will be shouldered by taxpayers.
At best, TIF is a bet that the retail/commercial/residential economy will improve fast enough to pay for a subsidy to the developer. At worst it is sleight-of-hand manipulation and what’s termed civic enhancements “free to the taxpayer” are simply deferred costs.
