The title to this post is a tad misleading. A more accurate headline would be "Why school boards are inclined to oppose TIF." But I hope I succeeded in grabbing your attention. Now, in the 345th part of the infinite part series Better Know a Local Government Development Policy I will try to explain why Tax Incremental Financing is tough on local school districts. I do this because I have yet to read an article in the local media that fully explains how TIF works, as well as the costs and benefits of the practice. Furthermore, I was disappointed to see that neither student paper covered the Madison Metropolitan School Board's unanimous opposition to the TIF district expansion for the Edgewater.
In addition to the city and county, the Madison Metropolitan School Board and Madison Area Technical College have powers to levy property taxes. Income from those taxes represent at least a third of the school board's revenue, as well as over 60 percent of that of MATC. During times of economic downturn, both entities look to their taxing powers to stave off the decline in revenue from decreasing property values, as well as the heightened costs from increasing enrollment (I can't explain the increase in the schools as for MATC, more people enroll in college when there are no jobs).
Dane County may have lost as much as $1 billion of property value in 2009. Gradually, the trend will reverse as the country and state climb out of the shadows of recession and the housing market improves. However, the higher property values will not result in increased property tax revenues for public schools in the newly-constructed TIF district for many years to come.
TIF freezes the property values in the district for all of the taxing entities except the city. The increases in property tax value is called the "increment," which the city taxes and invests in infrastructure and other development-related causes in the area. Meanwhile, the schools, the technical college and the county watch and wait for the TIF district to close. State law allows TIF districts to be open for as long as 27 years.
Like any other public investment made in the name of economic growth, TIF forces policy makers to strike a balance between the long-term benefits of the investment and the short-term threat to public services, such as public schools. Although the TIF district that is being expanded for the Edgewater is only scheduled to last nine years, that is already four more years of reduced revenue than schools, the county and MATC planned for.
Hence, it is not surprising that the school board voted unanimously to reject the TIF changes that the mayor, the common council and other Madison actors are pushing. As TJ Mertz, a Progressive Dane leader and education activist put it: "Hearing on Edgewater TIF: (yes, this is about schools.)"
The mayor justified the decision to make a number of private development investments during a recession by pointing to the low costs of construction during economic malaise. However, one could just as easily respond that a time of recession, in which local governments are starved for cash, is the worst time to burden public services with a short-term roadblock to tax revenue.