Rep. Barry Ivey, R-Baton Rouge, is pushing a bill that could make it more difficult to create the economic development districts that authorize Tax Increment Financing or TIFs.
Ivey’s proposed HB 850, which was approved today by a House committee, would require voters who live within a proposed district to approve its creation.
Under present law, only the municipal governing authority—like the Metro Council—is required to weigh in.
The bill would also require that boundaries of a district be contiguous—which they usually, though not always, are.
Additionally, it would prohibit a district from spending funds generated by the TIF to make improvements to a private property unless the district can show that the public benefit expected from the expenditure exceeds the cost of the improvements.
TIFs—which have been used throughout the Capital Region in the development of projects like Juban Crossing, Americana, Bass Pro, Costco and virtually all the downtown hotels—are frequently criticized as a way of enriching private developers.
Developers counter that the projects would not be economically feasible without their ability to use tax money generated by a new venture, that would not otherwise exist, to help recoup some of their costs.
Ivey says he doesn’t oppose such districts or TIFs in theory but is specifically concerned about five new districts created this year by the Lafayette City Council.
Ivey says certain properties were excluded from the districts to remove any potential opposition to the TIFs.
“They started cutting parcels of land out until they had a district with no residents,” Ivey says. “One of the benefits of doing that is there is nobody to vote on the tax, so they passed a tax without a vote of the people.”
Local real estate attorney Charles Landry was the mastermind behind the five Lafayette district TIFs, and says there is nothing unusual about the way they were structured.
“It is not unusual that these districts are created to carve out where existing registered voters live,” he says. “There are thousands of these and they are designed to avoid impacting registered voters.”
What is unusual about the Lafayette districts is that four of the five were created not to benefit a private developer but to help small business owners, who came together and formed a nonprofit organization that will collect TIF money and use it to fund infrastructure improvements to make their areas more attractive shopping and dining destinations.
“This is an opportunity for the businesses to tax themselves to pay for infrastructure for their area,” he says. “The only people who are opposed to these districts do because of philosophical, personal beliefs that there should not be taxation without a vote of somebody. But what is the alternative? Pass a tax on everybody? Nobody is going to pay a new tax unless it is of benefit to them.”
Ivey says he doesn’t want to do away with TIFs and economic development districts but wants to make sure the revenues they generate benefit the public good and not “some bad actors with nefarious intentions.”
Landry counters that the bill, should it become law, will effectively kill the financing tool.
“If you require a vote of the people no one will do these districts,” he says. “Plus, you don’t need a vote of the people. If you don’t want to pay the tax in an economic development district you vote with your steering wheel and go somewhere else.”
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