Saturday, November 03, 2007

I received a letter from BIZPACK this afternoon. What is BIZPACK?

The Greater Fort Wayne Business Political Action Committee (BIZPAC) is an organization lead by a non-partisan Board of Directors. BIZPAC supports elected officials or candidates who are advocates for limited government, free enterprise, and a pro-business, pro-economic growth environment in the Northeast Indiana region.

Here is what they have to say about TIF's.

Use of TIF:
BIZPAC believes that tax incremental financing (TIF) is an important tool. TIF allows us to create special districts that will generate private-sector development. During the development period, the tax base is frozen at the predevelopment level. Property taxes continue to be paid, but taxes derived from increase in assessed values resulting from new development go into a special fund created to retire bonds issued to originate the development or to leverage future growth in the district. While we should be cautious of when and how TIF may be used, BIZPAC supports its use with the following principles:

  • Private development would not occur without the stimulative actions.
  • The tax base in the redevelopment district was stagnant or declining, and the tax increase would not have occurred but for the public expenditures.
  • Healthy areas that grow and develop without the intervention of the TIF do not need tax revenues diverted.
Here is my response to TIF's
The problem is that during the frozen period, the city infrastructure needs to be maintained. This added cost is not paid for by these redirected funds. As a result the taxpayers outside the tiff either have to pay higher taxes or cut services. At the end of the frozen period, the accumulated cost of paying for maintenance of the roads, sewers, snow removal, stop lights and curbs far exceeds the frozen predevelopment level. In simple terms you cannot get something from nothing.

The second problem with TIF's is that the taxpayer takes on the greatest risk. They buy the land, put in sewers, road upgrades, traffic lights, and a lot of other costly tasks. What happens if the venture fails?

If the private sector thinks they can make money at creating something, they will. It is only when the private sector thinks the risk is too high and the returns are too low that they will not invest capital. However, if they can find a sucker willing to reduce their cost and risk exposure, they certianly will invest. Just look at Kitty Hawk. The taxpayers are on the hook for $36 Million unless we can find another sucker to take it off our hands.

I am truly sorry to learn that BIZPAC lacks the mathematical skills in analyzing this ponzi scheme. It is no different than what was used to create the Social Security and Medicare programs. I am also sad to learn that BIZPAC agenda are "advocates for limited government, free enterprise, and a pro-business, pro-economic growth environment in the Northeast Indiana region" yet want to use taxpayers money to compete with existing business. Example is Glennbrook Vs Jefferson Pointe. Did we really need another shopping center? Or are people spending any more in Fort Wayne or just redistributing their spending? Redistribution is government interference is socialism.

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