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heraldsun,com: printer-friendly story [back] ~O~ sunald Amendment One, but use with care The Herald-Sun October 1.3, 2004 4:58 pm On Nov. 2, North Carolinians will be asked for the third time since 1982 to give their assent to amending the state Constitution so that local governments can bypass a referendum on revenue bonds for public-private economic development projects. Amendment One would do so by allowing tax- increment financing (TIF) in this, one of two states lacking such authority (the other is Arizona). There is a place in the spectrum of public financing for TIF, and the mechanism For' using it here contains numerous safeguards, but voters should do their homework before deciding to vote for or against Amendment One. To hear the enthusiastic backers of TIF tell it, this means of financing streets, parking decks, sewer systems and even affordable housing needed to lure private money into specified redevelopment districts is akin to perpetual motion. The idea behind TIF is simple: Redevelopment raises property values, thus producing higher property taxes which are then used to retire TIF bonds issued by the state. Ergo -- no cost to the taxpayers, But there is a cost. You,just don't see it, because the tax revenue that must go into retiring TIF bonds isn't available for other public purposes, And, in case of default by developers, the taxpayers are the ones who will twist in the wind. North Carolina learned a hard lesson about the perils of exuberant public financing during the Great Depression, when many local governments were forced to default on bonds. As former deputy state treasurer Charles Heatherly noted not long ago, it took 30 years to clean up the mess and restore North Carolina's reputation in the bond markets. None of this is to suggest, however, that approving TIF would be a fiscal disaster for North Carolina in the current economic climate. Because TIF bonds would have to meet a stiff series of qualifications overseen by the nine-member N.C. Local Government Commission, the likelihood of approval for off- the-wall economic development projects promoted by nonprofit groups, a source of frequent scandal in Durham, is essentially nil. We should also note that one of the members of the Local Government Commission is the state treasurer, whose office has been a bulwark of sound fiscal policy since the 1960s, So most safeguards against abuse of TIF ar'e in place. We suggest one more: A requiremenfmaking developers responsible for reimbursing government for infrastructure expenses if a project falls through or, worse, fails. TIF is not a financing mechanism to be used lightly or frequently. TTF moves accountability for incurring public debt another step away from the taxpayers, and for that reason alone should be invoked only as last-resort financing. Amendment One, yes -- but with eyes wide open. http://www,heraldsun.com/tools/printfriendly,cfm?StoryID=532516 10/14/2004