Back in 2000, economic-subsidy expert Greg LeRoy of Good Jobs First said this to me about tax-increment financing, in which new tax money from a development is earmarked to pay off the development’s bond costs:
“TIFs are among the most problematic kinds of subsidies in America today. Right now we’re in the middle of this giant real estate boom, but real estate markets are cyclical. During the crash in real estate values in the early ’90s, some places got caught in the downdraft, and the increment evaporated. And you’ve got a situation where a liability that was supposed to be taken care of by the TIF is now eating the lunch of the general fund.”
From Wednesday’s Louisville Courier-Journal:
Paying for the KFC Yum! Center depends on more people spending money downtown, but the plan to use rising sales tax revenues to cover part of the arena debt failed to produce a single penny last year….
And if sales tax projections continue to lag, Metro Government could have to come up with an extra $3.3 million to cover arena costs as early as 2012….
Without any of the $4.5 million in projected sales tax revenues, the project received just $678,000 worth of tax rebates last year — nearly all of it from property taxes.
Now, the KFC Yum! Center — yes, that really is its name — doesn’t even open until next month, so it’s possible things will look better in coming years. Still, you can’t say Louisville wasn’t warned.