Once tiresomely again, the courts will have to save us from the folly of our public servants. This time, they will have to protect us from city fathers who want to take tax dollars that people voted for the public schools and use them to fatten the pocketbooks of private developers. The North Little Rock City Council last week created not one but two special districts that will pledge future growth in property taxes to benefit developers, a scheme called tax-increment financing, now shortened to TIFs.
One district would embrace much of Dark Hollow, the pristine wetlands east and south of the Interstates 30 and 40 intersection, where developer Bruce Burrow of Jonesboro plans another big shopping center anchored by a Bass Pro Shop. Another would cover the lower Baring Cross neighborhood on the north bank of the Arkansas River, where a residential development is planned.
TIFs work this way: The city will borrow money on long terms and build streets, sewers, gutters and other infrastructure so that the developer will not have to spend his money on those things. The bonds then are repaid from future property tax growth in the TIF district — money that ordinarily would go to the schools and city and county governments for police, streets, roads and other services.
The argument for wresting the advalorem taxes away from schools and municipal and county services is that without the development there might not be much growth in the districts and therefore little growth in taxes. But that could be true of every development: every new home, every service station, every apartment building, store or clinic. They never got a big government subsidy and most still will not get one. TIF subsidies go to the very few, giving them a big advantage over competitors. TIF schemes originally were supposed to be for very depressed neighborhoods that would otherwise not be appealing to private development capital.
But since Arkansas awakened in 2001 to find that a murky constitutional amendment that voters had approved on entirely different premises included language allowing school taxes to be siphoned off for private commercial development, its use has been almost exclusively in very prosperous growth areas. Dark Hollow doesn’t fit either description. It is not blighted; it is simply undeveloped for the simple reason that it is a natural wetland where any kind of development will require huge sums for infill and stabilization for streets, building and parking. The metropolitan area should not feel blighted by having a large wetland in its heart. It is a good thing.
Sure, if the taxpayers pay for all that work, the mammoth Shoppes at North Hills will be a bonanza for the developer and the merchants, who will have a big advantage over regional competitors. It will be at the heart of the metropolitan area along the most traveled thoroughfares in Arkansas. (Make it also one of the most dangerous thoroughfares after the mall is added to the web of interchanges right at the heart of the state transportation network.)
But that is North Little Rock’s business, right? Why should anyone else care?
It is everyone’s business. The future taxes that would be siphoned away from North Little Rock schools will be siphoned away from every school in Arkansas be-cause of the intricate state school-finance system. Because North Little Rock will be slightly more impoverished, the other 210 school districts in Arkansas, including schools in the Pulaski County Special School Distric, will step in and make up most of the difference. We think the transfer of tax receipts for TIF developments violates the Arkansas Constitution, which says that taxes raised for education may not be used for anything else. The attorney general has already opined that the growth in receipts from 25 mills of local school taxes in each district may not be co-opted by TIFs because it is now considered state money, not local, under Amendment 78.
That issue is making its way to the Arkansas Supreme Court. If the Supreme Court rules on all the constitutional issues, the city council’s actions may be moot by late this year. But the high court has a pattern of avoiding constitutional judgments if cases can be decided on other premises. To be sure that this madness is put to rest, North Little Rock should be taken to court, too. Right away.
