Leader Blues

Tuesday, October 02, 2007

EDITORIALS>>TIFs make bad policy

There are enough lawsuits without our demanding more, but the public interest cries out for one more, to halt the theft of public school funds for private developers. North Little Rock provides a ready defendant.

Mayor Patrick Henry Hays and the North Little Rock City Council this week approved four new tax-increment financing districts, which will take thousands of dollars away from the cityís financially distressed schools for many years, maybe a quarter century. The North Little Rock School Board expressed its unhappiness.

Weíll try again to explain this crazyquilt problem. Tax-increment-financing (TIF) districts, which were sneaked into the Constitution by an initiative amendment in 2002, take the annual growth in property tax revenues in a designated TIF district and use it to pay off bonds issued for capital improvements that help commercial developments. The theory is that the commercial improvements increase property values and real-estate taxes so those extra taxes should be used to finance the improvements. TIFs originally were supposed to combat urban blight, although they can be used in a country club subdivision in Arkansas.

The Arkansas Supreme Court last year ruled that TIF districts could not get their hands on the revenue growth from the first 25 mills levied by a school district because those taxes were actually a state tax, which was remitted to the state government and redistributed among the 250 or so school districts in Arkansas. But the court did not rule whether the tax growth on a school districtís millage above 25 mills could be taken away from the schools and used by the city to help private developers.

That question needs to be decided for the sake of school children. The Constitution says that taxes levied by the voters for the schools cannot be used for other purposes. We do not think the 2002 amendment repealed that law, which was put into the Constitution to reassure voters that if they voted to tax themselves for schools then state or local lawmakers could never confiscate the taxes and use them for another purpose.

TIFs are popular with city and county officials everywhere, and why not? They take credit for capital improvements but do not have to take the heat for raising taxes or diverting money from other city and county programs to do it. The school people already took the heat. Itís every politicianís dream. But it is terrible public policy, and we think the courts will stop if the issue is presented to them squarely.