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heraldsun.com: printer-friendly story [back] ` ` sunald Amendment would affect borrowing By BEN EVANS, The Herald-Sun October 12, 2004 10:03 pm DURHAM -- Critics call a proposed amendment to the state constitution a risky corporate handout that would divert tax dollars from basic government services like schools and police departments, Supporters say it's a vital tool in the increasingly competitive world of economic development. And they're quick to point out that North Carolina is one of only two states in the country that doesn't already use the financing option, On Nov. 2, voters will choose, marking yes or no on a statewide referendum "Amendment One." The measure would alter the state constitution to allow local governments to borrow money for economic development projects without voter approval. Under the so-called tax-increment financing proposal, cities and counties could boost public-private developments in targeted areas by selling bonds to pay for parking garages, streets or other infrastructure. The governments would repay the bonds solely from the extra tax revenues the new projects create. Durham officials say downtown's publicly subsidized American Tobacco redevelopment would have been a good candidate for the financing. Instead of paying the project's $4:3.5 million subsidy from their general budgets, the city and county could have created a special tax district around American Tobacco and borrowed against the increased future tax value of the reborn factory.. Under that scenario, the debt would be paid off strictly from that district's new tax revenue. "I think it offers a tool for local governments to provide for development at no tax increase to citizens, as you see generally with [traditional] bond issues," Mayor Bill Bell said. "The good thing to me is that you can absolutely say to the residents that your taxes aren't going up because of this," Critics say that's not quite true. Tax-increment financing erodes city and county tax bases by earmarking future tax revenues for corporate incentives, sticking existing taxpayers, who live outside the special tax districts, with the burden of paying for basic services. Taxpayers also could be left holding the bill if the developments fail to produce expected tax revenues, critics warn:. The debate has created an unusual coalition of liberals and conservatives against the measure. "They're taking the revenue that would have come to the city coffers for schools and police and fire and all of that and paying for a development project," said Chad Adazns, a Lee County commissioner and director of the John Locke Foundation's Center for Local Innovation in Raleigh. "You're not getting any new revenue for .., basic services until that bond is paid off; if that bond is paid off. And you're doing it http://www,heraldsun.com/tools/printfriendly.cfm?StoryID=532241 10/13/2004