Movement on TIF Bill

There’s potential for tax-increment financing (TIF) reform this legislative session. My colleague David Stokes and I recently submitted testimony for a hearing on House Bill 1598 (HB 1598). In general, TIF takes tax revenue normally collected by taxing districts and municipalities and diverts it to developers. HB 1598 addresses one troubling consequence of TIF by requiring that local elected officials vote to approve the diversion of dedicated public safety taxes to subsidize TIF-related projects.

Taxing districts such as school districts and emergency service districts lose out on tax revenue along with cities when TIF projects are implemented. However, these taxing districts have very limited say, if any, in the overall process. This imbalance can have disastrous effects, especially when TIF is used for projects with a residential component. Residential developments can add dozens of new families to cities and thereby require increased spending on public safety measures, yet TIF can mean that public-safety providers do not receive any increase in tax dollars to account for these new families. (The impact of residential TIFs can be even more dramatic on school districts—SB 874 is a bill that proposes a similar measure for school districts.)

HB 1598 would be a step toward fixing some of the harms caused by TIF. The House Local Government Committee held a public hearing on this bill, and I’m interested to see if this bill picks up momentum during the legislative session. More taxes should be exempt from TIF, and greater reforms are needed to limit the negative effects that this economic development incentive can have on Missourians.