So rare is it for a city council to reject a developer’s request for tax incentives that such an event—like a passing of Halley’s Comet—warrants recognition.
Last month in Edgerton, at a joint meeting between the city council and the redevelopment authority, officials refused a local developer’s request for $430,000 as part of a $1.3 million project to build an eight-unit apartment complex.
When these requests arrive at council meetings, they’re typically granted and often embraced by elected officials who are quick to promote a project’s economic promises. That a group of representatives in Edgerton made a calculation determining a project’s costs outweighed the benefits is to be lauded. It means they’re not just rubber-stamping agreements. They’re thinking about the wisdom of the project itself and, presumably, the potential consequences to taxpayers.
The council’s decision seemed to befuddle developer Dan Rinehart, who said it was a “little confusing to me because we’ve been doing plans similar to this.”
But the project’s math wasn’t mysterious, City Administrator Ramona Flanigan said. While the project would have cost $1.3 million, it was expected to add only $750,000 of value to the tax base. Other projects, including some advanced by Rinehart, have offered a much better return, she noted.
Rinehart has a track record of working with the city to improve the downtown, notably in renovating three former tobacco warehouses into apartments. The city’s revitalization efforts have been a success by most measures, and Flanigan said the city remains open to working with Rinehart.
“This isn’t an indication of anything of the future,” she said. “It’s simply an indication of the credentials of this project.”
Edgerton’s decision should serve as a message to other councils that they’re free to scrutinize tax incentive proposals. Local government has no obligation to subsidize development. Though it may be in a city’s interest to offer tax incentives, city councils should recognize this isn’t true for every case.
Where to draw the line on tax incentives is a tricky calculation because it’s difficult to predict when or if the financial fortunes of a tax increment finance district might sour. TIF districts were once rare designations, but today local governments seem more willing than ever to risk tax dollars in hopes of luring companies dangling the promise of jobs.
When appropriately applied, TIF districts can resurrect ailing parts of cities, and both Janesville and Edgerton have been using TIF districts to spur downtown development.
Edgerton has made downtown living a focus of its redevelopment efforts, believing restaurants and other niche businesses will thrive in a downtown with mixed uses. The strategy appears to be working and one worth trying to replicate in Janesville.
But each TIF deal must be evaluated on its own merits, and a public official’s task boils down to a simple question: Do a project’s costs outweigh the benefits? If so, councils should follow Edgerton’s example and reject proposals that offer minimal returns.
City councils can be open to development possibilities while still safeguarding taxpayer funds. Councils should show developers that their approval must be earned and cannot be taken for granted, regardless of the size of a project or the number of jobs promised.