TIF has become much less about developing blighted communities and more about affluent communities competing with each other so they can boast about lavish shopping malls, new hotels, bigger office buildings, and (soon) golf entertainment centers.
Have you heard of Topgolf? It’s essentially a driving range on steroids. You hit a golf ball from a climate-controlled bay that is serviced by a bar and restaurant. It’s great fun, but Des Moines doesn’t yet have one or a facility like it.
But it soon will.
In November, a golf entertainment venue called Suite Shots, which licenses Topgolf technology, announced it is developing a multi-million dollar facility in West Des Moines. And just two weeks ago, officials in Johnston detailed the plans they were making with another company called Bombers to build something very similar in their city.
So now, the Des Moines metro might have two of these facilities. Sounds great—until you hear what is behind the second one and that some of your tax dollars will pay for it.
While Suite Shots in West Des Moines will be developed without government funding, Johnston is giving Bombers an incentive package that includes $14 million in tax increment financing (TIF) rebates to build their facility across the street from an Audi dealership. It’s not just the local taxpayers who are on the hook here. All Iowa taxpayers foot the bill because the state general fund has to “backfill” tax revenue that local school districts miss out on because of TIF.
TIF has existed in Iowa for decades. Originally designed to be deployed in blighted communities for projects that otherwise couldn’t obtain financing, TIF works by allowing local governments to borrow money with debt secured by the future growth of taxes within that TIF district. Local governments can then pay for development by using new, or “incremental,” property tax dollars.
TIF can be beneficial when utilized correctly in blighted communities and where development wouldn’t otherwise occur. But this is precisely where communities in Iowa may have lost their way. Across Iowa, barely 15 percent of TIF districts were created with slum or blight conditions as a justification to create the district.
Even more concerning, Iowa has never had a “but for” requirement when creating a TIF district. Professors Craig Johnson and Kenneth Kriz write, “The idea behind the ‘but for’ test is that TIF should be used if, but only if, the development would not occur without the TIF subsidy…TIF should not be used to subsidize development that was already going to occur. That would be a waste of taxpayer funds. It would also provide an unnecessary subsidy to private developers.”
That academic thinking seems to make sense, but how could one ever know if a “development would not occur without the TIF subsidy?” Maybe if a similar project was already planned without subsidy in the same metropolitan area. From that perspective, the competing golf projects present an interesting case study.
Over time, TIF has become much less about developing blighted communities and more about affluent communities competing with each other so they can boast about lavish shopping malls, new hotels, bigger office buildings, and (soon) golf entertainment centers. The fact that a similar facility is being planned within the same metropolitan areas suggests that this type of venue doesn’t need millions of dollars of TIF subsidy to come to Des Moines. It’s hard not to wonder if this is the type of project Professors Johnson and Kriz described as a waste of taxpayer funds and an unnecessary subsidy to private developers?
Iowa’s legislature has an opportunity to add commonsense guardrails around TIF. The best place to start would be requiring a stringent “but for” test for TIF projects, forcing a local government to prove a proposed development truly wouldn’t occur without the TIF subsidy. This requirement would need to have teeth behind it and not simply allow local governments to merely claim that TIF was necessary. Reforms to Iowa’s TIF system would go a long way to leveling the playing field for private businesses while also protecting the taxpayer’s best interests.