Amendment One: A Sprawl Subsidy

Besides facing choices in many critical electoral races, North Carolina voters this year also confront decisions on three proposed constitutional amendments – one of which, unfortunately, would enable public tax dollars to be spent subsidizing the state’s already serious sprawl problem.

Amendment One would create a publicly supported economic development program known as “tax-increment financing,” or TIF. This program allows local governments to issue bonds (that is, borrow money) without voters’ approval in order to develop an area. It then diverts the additional tax revenues – or “tax increment” – gained as a result of the improvements away from existing tax-collecting authorities to pay off the bonds.

TIF’s proponents – a high-powered bunch led by N.C. Citizens for Business and Industry and former Governors Jim Hunt, Jim Martin and Jim Holshouser – argue the program is needed to help develop blighted areas considered too risky by private capital.

But the program has sparked widespread opposition. Some of its critics – such as the conservative John Locke Foundation and progressives at the Common Sense Foundation and N.C. Budget and Tax Center (PDF) – criticize TIF as a form of corporate welfare.

But there’s another problem with North Carolina’s TIF program, first reported by Raleigh Eco News last December.

“This legislation, if approved by voters, will support sprawl by allowing TIF to be used for big-box retail and other commercial projects outside of the state’s urban cores,” says Alyssa Talanker, a TIF expert with Good Jobs First (GJF), a Washington-based nonprofit that promotes accountable development.

GJF last year released a report titled “Straying From Good Intentions: How States Are Weakening Enterprise Zone and Tax Increment Financing Programs.” It documents various ways in which loosely worded TIF laws have been used to subsidize sprawl.

For example, authorities in Illinois allowed the creation of a TIF district in a wealthy suburb near Chicago to keep Sears, Roebuck & Co. from moving its headquarters out of the state. In Iowa, TIF was proposed to subsidize a suburban golf course project that included a hotel, health spa and retail stores. One Pennsylvania community near Pittsburgh proposed using TIF to flatten a valley, re-channel a trout stream and pave wetlands for a shopping mall.

North Carolina’s TIF law could be similarly misused as it fails to set strict criteria for eligible districts. Rather, it defines such districts broadly as comprised of property that is “one or more” of the following: blighted, deteriorated, deteriorating, undeveloped or inappropriately developed from the standpoint of sound community development and growth; appropriate for rehabilitation or conservation activities; or, vaguely, “appropriate for the economic development of the community.”

There are also other environmental drawbacks to North Carolina’s TIF initiative. For example, it requires the N.C. Department of Environment and Natural Resources to determine whether a project would have an adverse effect on the environment or violate any federal or state environmental laws – but only in cases where the TIF involves new manufacturing facilities. There is no such requirement for TIF projects involving office buildings or retail developments.

And though the measure caps the amount of land that can be used for large retail projects, it does not cap the amount of TIF and other subsidies that may go to project developers.

“Under these provisions, TIF may be used to fund shopping centers and other big commercial projects located at the outer limits of a county or city,” Talanker says.

In other words, it may be used to subsidize sprawl. Come election time, North Carolinians will get the chance to say whether that’s something they want their tax dollars to do.