"What About TIF?"

by Wesley Fields

Although tax increment financing (TIF) in Kansas City has generated approximately $1.5 billion dollars in investment, constructed or renovated nearly 1,500 hotel rooms in downtown alone, developed over 2 million square feet of retail space and over 5 million square feet of office space, brought or retained 43,000 jobs to Kansas City, with an annual payroll of nearly $2 billion, critics of TIF have often concluded that the City of Kansas City, Missouri suffers financial loss to the benefit of private developers.

Prior to Bryan Cave serving as general counsel to Kansas City's TIF Commission, I shared many of the sentiments of TIF critics and often questioned the benefit of TIF. However, after working on several TIF Projects over the past three years, I have grown to understand that if appropriately used, TIF is one of the most creative alternatives to reenergize a slumping economic community and enhance a community that is experiencing economic prosperity and growth. It permits city officials to focus their efforts in implementing public improvements, luring private investment and attracting businesses and jobs to Kansas City, which collectively, has the effect of overcoming the symptoms of economic stagnation by increasing our over-all tax base which ulti- mately increases the quality of life for all citizens of Kansas City. Thus, TIF has the potential to provide substantial benefit to Kansas City.

Although TIF serves as a viable alternative for stimulating economic development, critics often allude that TIF is overused and therefore has the effect of stifling private investment for the entire City because developers will not invest in our City unless they set their TIF entitlement. In other words, if TIF is the grand prize given only to the most deserving development projects, that grand prize becomes tainted if every developer is declared the winner. If TIF was created to benefit our community rather than individuals, our community must demand that a rigorous standard be utilized by the City as to when we apply TIF to development projects and secondly, our community must seek to build consensus as to where we direct TIF.

The Real Property Tax Increment Financing Allocation Act (TIF Statute) provides that standard as to when TIF may be utilized. Certain findings must be made in order for TIF to be applied, which include, but are not limited, to the following:

First, the area in which development is located must be declared a blighted area, a conversation area or an economic development area (terms defined in the TIF Statute), which has not been subject to growth and development through investment by private enterprise and would not reasonably be anticipated to be developed without the adoption of TIF. The standard is generally known as the "but for" test.

Second, the redevelopment plan must conform with Kansas City's FOCUS Plan.

Third, in order to determine whether the project is financially feasible, a cost benefit analysis must be conducted, which shows the economic impact of the development project. The analysis should show the impact on the economy if the project is not built versus if the project is built.

A rigorous application of the above standards must be applied to determine whether a project should qualify for TIF, but the analysis as to whether TIF should be awarded should not stop at whether TIF qualifies under state statute. Rather, we must also consider where TIF is applied. This is not a decision that any one individual should make on behalf of our community at-large. Rather, it should be decided based upon a collective vision expressed by the community, who ultimately stands to benefit from TIF. The decision to apply TIF in certain areas of the City must receive the benefit of a plurality of opinion. As the German philosopher Hegel once noted, the effectiveness of pluralism requires each voice affected by societal conditions to be heard.

Therefore, city officials, developers, neighborhoods, business and community leaders, affected taxing districts, such as counties and school districts, must collectively set the agenda for where and how much TIF should be utilized. Therefore, TIF is not necessarily the problem. It has resulted in many substantial projects to our City that would not otherwise have occurred. However, it can serve Kansas City even better if we treat it as a grand prize and we have the courage to rigorously apply the statutory standards of when it is utilized and the collective vision to determine where it should be utilized.