Tax Increment Grants — TIGs for developers — are about to be turned into a perpetual slush fund, with Baldwin’s Council handing out the goodies and Raleigh taxpayers saddled with long-term debt.
After a remarkably cursory once-over yesterday in committee, City Council is a step closer to creating what amounts to a perpetual $5 million-a-year slush fund for developers, to be handed out for pet projects at Council’s discretion.
Worse, grants would not be for one year only. Developers could be given a contract for so-called tax-increment grants of up to 15 years’ duration — with no limits on the number of such contracts for a favored developer.
Thus, a project like Kane Realty’s giant Downtown South could be given a 15-year commitment in Year 1 — for, say, $3 million a year x 15 = $45 million — and be given another 15-year commitment in Year 2 that would add an additional $2 million a year through Year 16.
The only fiscal constraint on this would be that the total of all such grants could not be more than 2% of the city’s annual property tax revenues. Currently, that 2% figure equates to about $5.1 million. But any time they want to, City Council can vote to exceed the 2% limit by changing it to 3%, or 4%, or whatever. That’s because this is “policy” and Council wants it “flexible.”
This is long-term public financing for developers, but with no say for the public. It’s a giant departure from anything Raleigh has ever seen before — a very bad departure and an open invitation to corrupt bargains.
In effect, it’s a 15-year bond issue for up to $75 million, but without the public getting a chance to vote on the bond or know the list of projects. No requirement that what gets funded be the public’s priorities.
Rather, what gets funded will be stuff the developers want in their projects — with taxpayers forced to subsidize them.
And, by the way, the $75 million would never get paid down.
Unless this is stopped or dropped by a future Council, taxpayers will be on the hook in perpetuity for that $5 million a year, in the form of contracts with developers reached up to 15 years earlier. After Year 16, one set of $5 million-a-year commitments would expire annually, but a new set of developers would be lined up at the trough.
Weirdly, the Council committee review yesterday was conducted by Council Member Jonathan Melton in his capacity as Economic Development Committee chair, with only Mayor Mary-Ann Baldwin in attendance with him. Councilor Corey Branch “attended” while driving somewhere. Branch’s attendance made 3 — a legal quorum. The 4th committee member, David Knight, skipped the session.
Melton asked no questions. Baldwin, who has pushed openly for TIG money for Kane, asked about another project, the big DeWitt Carolinas project in the Midtown area. Assured that this one, too, could get a TIG, Baldwin was satisfied. The committee voted 3-0 (Branch voting from his car) to recommend this new slush fund to Council.
The only remaining hurdle before final Council action: Staff was instructed by Baldwin to clean up the language in the policy related to public engagement. So far, it reads like there won’t be much. Baldwin wants it to sound better.
Read more about TIGs here: Racing Toward a TIG