Downtown areas across
Michigan are looking for new residents and businesses, but the latest package of
bills being discussed in Lansing aren’t the cure. The legislature is considering
legislation that would allow cities to "set up
historical neighborhood tax-increment finance
At first glance, the idea
has some merit. Many downtowns do need revitalization, and historic buildings
can contribute to community life. A closer examination, though, reveals that
such a proposal combines three errors into one package: historic districts, tax
increment financing, and an obsession with the latest fad in urban planning.
HISTORY PRESERVED PRIVATELY
Start first with historical
districts. Once government planning is put in charge of historical preservation
efforts, the result is high-handed and capricious management that puts
politicians and community busybodies in charge of privately owned property.
Does your house need a new coat of paint? The historical commission must
approve it first. Thinking of using an old house as a rental property? Wait
until the historic commission approves your remodeling plans – if they approve at
In 2000, Owosso enacted a
historical preservation ordinance, aimed at encouraging local development and
preserving the city’s heritage. After citizens learned of the onerous
restrictions created by the new designation, they demanded a public vote on the
issue. The subsequent ballot measure lost by a vote of
70 percent to 30 percent. The
residents of Marshall, by contrast, have shown that
private cooperation is the best way to
capitalize on the economic, aesthetic, and historical value of older homes.
The downtown initiative
also contemplates tax increment financing (TIF). In theory, TIF is a good idea.
It designates city blocks (or even a single building) as a special district, and
pours in public money for improvements. The expected increase in property
values – the increment – is reflected in increased taxes which go to repay the
costs of the improvements.
TAX INCREMENT FINANCING:
TIFs are fraught with
significant problems, such as unfairness. TIFs can displace long-term
family-owned businesses and neighborhoods in favor of wealthy corporations (such
as GM) that fail to deliver on their promises to deliver more jobs. As seen in
Detroit, and other cities across the
country, the designation of an area as a TIF district is a wrinkle on the idea
of government picking winners and losers.
A TIF allows politicians to
point to a new development and say, "Look what we did." Perhaps that’s one
reason why they are attractive. But in general, TIFs do not produce a net
increase in economic activity; they merely
shift money around.
It is no wonder, then, that
as an economic development tool, TIF is inferior to the mundane activity of
creating the right economic climate for people and business. A study produced by
the Citizens Research Council, found that the economic health of a community is
better served by lowering the
overall tax burden rather than
engaging in selective tax reductions.
THE LATEST URBAN PLANNING
To the errors of
government-controlled historical preservation and tax increment financing, the
parcel of legislation under consideration adds an interest in the latest fad in
urban planning, "stopping urban sprawl."
Though urban sprawl is
poorly defined, advocates of so-called "smart growth" use it as a rationale for
taking various measures to pack people into cities. Examples of
smart growth policies include starving funding for road
projects in favor of mass transit, and using tax and regulatory policies to
encourage more people to live on less land.
But as one Mackinac Center
publication put it, "the solution to "urban sprawl" lies in
fixing the problems that cause people
and businesses to leave cities in the first place."
Across Michigan, downtown
areas need transformation. The solution to urban ills – declining population,
stagnant property values and budgetary troubles – lies in less government
intervention, not more. It does not lie in giving busybody committees the
authority to decide if your house meets "historical standards." Neither does it
lie in playing favorites with the tax code, or chasing after the latest fad in
urban planning. Instead, officials must address the concerns – crime, bad
schools, bloated city budgets, capricious regulation – that drive people from
A native of Muskegon and graduate of Kalamazoo College,
John R. LaPlante is an adjunct scholar with the Mackinac Center for Public
Policy. He has written for the Mackinac Center on
contracting out state-owned ski resorts and local regulations affecting
grocery super-centers. Legislation to create new taxing districts can be
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Copyright © 2004 Mackinac Center for Public Policy