Making the best TIF deal

Although I do not live in the Cape Girardeau School District, I manage several business enterprises in Cape Girardeau which pay in excess of $175,000 a year in property taxes on real estate within the district's boundaries. With this vested interest, I felt it necessary to respond to the Southeast Missourian's recent editorial regarding the tax-increment financing request of Prestwick Plantation and the school district's position.

The editorial posed two questions regarding the position that Mark Bowles, superintendent, has taken on behalf of the Cape Girardeau School District: If TIF is good, why not support it? Or if TIF is bad, why not oppose it? Unfortunately the issue is more complex.

The answer to both questions is simply this: The politics of TIF do not allow the district to take a position without potential damage to its public trust and/or financial stability. Approval of TIF is a political process in that the ultimate power to approve this tax abatement lies with the vote of the Cape Girardeau City Council. The council allowed the district the privilege of reviewing the TIF proposal (as noted in a Nov. 12 article) and submitting its written recommendation regarding the effect that implementation of this project would have on the district.

There was no assurance that approval would be withheld solely based on the district's finding the project detrimental. This brings me back to Bowles' political dilemma.

Let's assume Bowles favors TIF and accepts the compensation proposed by Prestwick. The risk of accepting this option is limited to the accuracy of the projections which justify the payments (by the way, this is a 23-year prediction into the future) and that the funding received will actually cover the costs of educating students and financing new facilities.

The greater risk at which Bowles would place the district by unilaterally endorsing TIF in any form (as you suggest in you editorial: "Either TIF's hurt the district or they don't") is that he has now opened the district up to all developers who wish to have TIF financing in the future. Each future proposal that is made puts the district and Bowles in a political position to justify why a residential TIF is acceptable to the district and a future development isn't, not to mention another look into the 23-year crystal ball.

Let's now assume Bowles opposes TIF. He digs in his heels and says there is no way the district will support TIF, refuses to accept the financial conditions proposed by the developer and maintains this stand to the council. The council might approve the TIF, and their approval could be in one of two forms:

1. The council approves TIF and negotiates an agreement with the developer which the council feels is fair to the district.

2. Approval is given, the council chooses not to negotiate terms with the developer, and the district receives only the tax revenue from the current tax base.

In either case, the district is forced to accept whatever terms the political process dictates and bear the cost of all school-related expenses generated by development in the TIF area. Even though this action by the council would be extreme, it is a possibility given that its vote controls the implementation of TIF.

Although neither of these positions is ideal, a prudent person would choose the option of accepting guaranteed payments (even with risk of a future shortfall) over the possibility of being grossly underfunded from the start or having a third party negotiate the terms you will abide by for the next two decades.

Looking at both potential scenarios (which assume passage of TIF), Bowles seems to have taken the proper position although it may straddle both sides. He has protected the finances of the district as best he can with the facts he's been presented, and he's also postured the district to analyze each future TIF proposal on its own merits. Bowles has done what the Board of Education would expect of him: formulate a position to best protect the financial integrity of the district.

Tim Goodman is the president of Benton Hill Investment Co. in Cape Girardeau.