[CPEO-BIF] Roseville (MN) development

[Lenny Siegel <lsiegel@cpeo.org>]

Submitted by Christine Ziebold  <cziebold@ih.org> 

To the Point!
Government Subsidies - Budget Cuts
by Senator John Marty
December 23, 2004

Minnesota, like most states, has faced tough budget decisions in recent
years.  Road maintenance and snowplowing have taken a hit.  Healthcare
for the uninsured was reduced.  Schoolteachers have been laid off.  Yet
government subsidies for private business continue unabated.

The absurdity of this extravagant government spending is obvious when
looking at professional sports.  Taxpayers, some of whom cannot afford
healthcare or basic necessities, provide funding for wealthy team owners
and athletes.

Latrell Sprewell of the Timberwolves, recently complained about an
inadequate contract offer because, "I got my family to feed." It must be
a hungry family -- Sprewell is receiving $14.6 million this year.

Vikings owner Red McCombs, who will likely end up with well over $300
million in profit when he sells the Vikings, complains that he cannot
make it economically without a new stadium.

Marie Antoinette's "Let them eat cake" is no more out of touch with
reality than this.  Even so, Speaker of the Minnesota House Steve
Sviggum boldly predicted that the state will build a new publicly-funded
ballpark next year as soon as it deals with a $1.4 billion state deficit
through additional budget cuts.

Taxpayer funding for professional sports is just the tip of the iceberg.
Federal, state, and local governments routinely give public funds to
businesses.  These payments are hidden through complex financing
arrangements so it is not obvious to the public what is going on.  Even
some politicians agreeing to the deals may not fully understand what
they are doing.

My home city, Roseville, is on the verge of giving as much as $47
million in public money to a retail and residential redevelopment.  To
put this $47 million in perspective, Roseville receives only about $10
million per year from property taxes from all residents and businesses
-- the windfall to the developer is almost five times that!

Proponents explain that some of the land has soil contamination that
needs to be cleaned up.  They neglect to mention that the polluters are
responsible for the clean-up costs.  When government agencies make a
serious attempt to collect money for pollution remediation, they usually succeed.

Even if the city was unable to collect from the polluters, only $7
million of the proposed $47 million subsidy is for clean-up costs.  For
supporters, that doesn't seem to matter.  They claim that much of this
is "free money".

Why?  They plan to use Tax Increment Financing (TIF) for the project.
Few people understand TIF, and most people's eyes glaze over if you try
to explain it, even though cities routinely give TIF subsidies.  In
theory, TIF provides funding out of the incremental increase of property
taxes collected after the development as compared to the property taxes before.

When this new development is completed consultants claim that the higher
value of the property will yield an incremental increase in property
taxes that totals about $27 million over the next twenty-five years. 
The city would give this tax money to the developer as a subsidy.  City
officials argue that this money would not otherwise be collected. 
Hence, they consider it "free money."

Not surprisingly, this isn't the whole story.  Failure to provide a
subsidy does not mean that no redevelopment will occur on such prime
property. Several years ago, Minneapolis provided a large TIF subsidy to
a developer of the south end of the Nicollet Mall.  A competing
developer pushed a plan to redevelop the property without taxpayer money.

When Minneapolis chose the first developer because that proposal
included a downtown Target store, they justified the TIF subsidy by
calculating the difference in taxes between the proposed development and
the taxes from the prior use of the property.  They ignored the
comparable taxes that would have been collected by the competing -- and
unsubsidized -- development.

These new developments, in cities across the state, cause higher costs
for schools, cities, and counties. For example, the housing in such
redevelopment brings additional school-age children into local schools.
These students are no less expensive to educate than their peers, yet
the schools will not collect a penny of additional revenue from the
redevelopment to pay those expenses, due to the TIF subsidy.  The same
is true for a myriad of other government costs.  Tax Increment Financing
simply shifts the burden to other property taxpayers.

Roseville already has the most retail per capita in the state -- more
than even Bloomington with the Mall of America.  Is it in the public
interest to spend $47 million or $27 or even "just" $7 million to add a
new Costco store in Roseville?

When the state budget is cutting off chemotherapy treatment to cancer
patients and laying off teachers in schools, it is indefensible to give
multi-million dollar handouts to the businesses with the best lobbyists.

To the Point!  is published by the Apple Pie Alliance.  For further
information about the Alliance and the Conservative Progressive Voice,
click here < http://www.apple-pie.org/aboutapa.htm > .

Permission to quote or reprint from To the Point! is granted if author
is credited. Copyright © 1999-2004 Apple Pie Alliance http://www.apple-pie.org

  

-- 


Lenny Siegel
Director, Center for Public Environmental Oversight
c/o PSC, 278-A Hope St., Mountain View, CA 94041
Voice: 650/961-8918 or 650/969-1545
Fax: 650/961-8918
<lsiegel@cpeo.org>
http://www.cpeo.org
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