Counties, Not Municipalities, Should Determine TIFs
The core of this issue has already been argued on the eastern side of the state. A 2007 change to state law granted more authority to county TIF commissions within the Saint Louis area, at the expense of municipal TIF commissions. This led cities within Saint Louis County to file a lawsuit attempting to overturn the change. Municipalities in the area had been enacting tax incentives, particularly TIF, with much greater frequency and much less fiscal prudence than the counties themselves. Fortunately, an agreement was reached between the cities and the county, and a modified version of the TIF commission still giving more power to the counties was agreed upon.
When it comes to TIF authority in the Kansas City area, though, cities still dominate. The Kansas City TIF Commission has 11 members, six of which are appointed by the city. The county, school districts, and other districts share the other five positions. Even if there is total opposition to a tax incentive proposal by every other government jurisdiction on the commission, the city can still pass any tax incentive it wants. Put simply, municipal TIF commissions are a rigged game and a closed process, whereby city officials can make decisions that have a dramatic effect on people outside of that city.
Which level of government should really be making these decisions about TIF or other types of tax incentives? The debate tends to weigh two sides: city officials who presumably have a better idea what might work for their city and their residents, or higher levels of authority that would hopefully consider a larger picture, because these tax exemptions and incentives generally have an economic effect that radiates much farther than just within the cities involved. I believe that the county level works best for these types of decisions. After all, county government is local government by every measure. I trust that the powers that be in Jackson County government are not so far removed in their courthouse skyscraper that they have no idea what might work well for the people of Kansas City, Independence, and Grain Valley.
Counties are also large enough that they can put proposed tax incentives into perspective, making decisions outside of a municipal vacuum. If these incentive decisions were made at the county level, cities would no longer face the fear and pressure to remain competitive with surrounding cities by issuing generous incentives to favored businesses. County officials would also have a much better claim to represent and, more importantly, remain accountable to the various entities and residents affected by such decisions. Cities would certainly maintain a voice in the process, as would school districts, through rotating appointments on the county TIF commission that could be determined by the locations of future proposals. That is how the commission now functions in Saint Louis County, and how it could (and should) work in Jackson County, as well in as the metropolitan areas other counties.
If judges and elected officials ultimately determine that TIF commission power should rest at the county level, we could expect an end to TIFs and similar giveaways in some counties, and a reduction in their use in many others. Saint Charles County, near Saint Louis, has been one of the fastest-growing counties in the state for three decades, yet its leadership flatly refuses to support TIF. It has never passed a TIF project in the unincorporated part of the county, and it has fought every TIF proposal within its cities. The tremendous fiscal discipline shown by Saint Charles County, while still experiencing great economic growth, helps demonstrate why these decisions work well at the county level.
The prominent abuses of TIF in Missouri have occurred within municipalities that push for tax incentives, rather than in the unincorporated areas of counties. Similarly, most of the ugly cases of tax incentives involving the threat of eminent domain abuse have also occurred in cities, such as Sugar Creek. So, what should be done with the Kansas City TIF commission? Area residents would benefit if it were abolished, and all its authority transferred to county commissions. I believe residents throughout Missouri would be better served by appointing countywide TIF commissions to be responsible for tax incentive determinations.
David Stokes is a policy analyst at the Show-Me Institute, a Missouri-based think tank.