Leader Blues

Tuesday, December 16, 2008

EDITORIAL >>TIFs no way to raise taxes

Innovative city officials like North Little Rock Mayor Pat Hays deserve both our admiration for trying to develop their cities and our forbearance for the shortage of good ways to raise tax monies to do it. But every innovation to raise that money is not worthy.

Mayor Hays has been ahead of the pack in employing one particularly harmful tool, the tax-increment-financing (TIF) district, which robs public-school treasuries to assist commercial developers. He proposes to use the tool to help a big developer construct a shopping mall in Dark Hollow, the swampy glade alongside Interstates 30 and 40. Now he is rushing to commit school taxes to build a parking deck for a hotel that may build downtown.

TIFs are a fairly recent innovation nationally. Future ad-valorem tax growth from rising property values are carved away from the local governments to which they are pledged and used instead to build infrastructure for commercial development in blighted areas. A constitutional amendment ratified in 2000 authorized Arkansas counties and municipalities to create TIF districts.

Hays would commit growth revenues from property taxes in three designated TIF areas in North Little Rock starting in 2009 to paying the mortgage for the parking deck. Most of the money would come from the already pinched public schools. The mayor’s plan seems plainly to violate the constitutional and statutory terms for TIF financing, but that is where sharp lawyers come in. Arkansas courts are not averse to crafty arguments for the Constitution not meaning what it says.

The Arkansas Supreme Court has already ruled that TIF districts cannot take money collected under the first 25 mills of taxes in any school district, but it has not ruled on the larger issue of whether they can take money collected under any school tax. The Constitution still says that property taxes levied by a vote of the people with the understanding that it is for the schools may never be diverted to any other purpose than education. For the sake of the schools, not merely in North Little Rock but all over Arkansas, that issue needs to be settled.

Mayor Hays is furnishing us with the perfect vehicle to establish the law. We like to think that in the right case the courts would side with children rather than developers, which we are sure is what people intended each time they ratified a constitutional amendment affecting school taxes.