Tuesday, September 14, 2010

EDITORIAL >>Wrong way for NLR

We have no interest but neighborly goodwill in the deal that Mayor Patrick Henry Hays has been trying for two years to put together with a developer who is supposed to one day produce a new hotel and parking deck for downtown North Little Rock. Our neighboring city’s good fortune is usually our good fortune, too.

But dangerous public policy has a way of traveling down the road. We wouldn’t want it to happen here.

John Gaudin, who has developed other projects in the Argenta neighborhood downtown, owns an old building, the Rye Furniture Co. building, and he wants to parlay that into a new hotel. The deal is complicated. He and the city would swap properties, his furniture building for four city-owned lots that are scattered around downtown. He might develop the four lots or he might not. Then when he reaches a deal with a hotel franchise, he could buy the furniture building back from the city and build the hotel. For its part, the city would build a parking deck nearby, which would make the hotel more economically feasible.

Every step has been a close call for the mayor. Nineteen months ago, only hours before the year-end deadline for changing the tax rolls, he got his city council to create a development district consisting of disconnected parcels of land downtown by using a tricky constitutional amendment and implementing legislation permitting what are called “tax-increment financing districts.”

The growth in property taxes in the development district is to be used to support the city’s payment on bonds to build the parking deck. But a court decision put most of the tax revenue from development districts off limits for cities. A lawsuit by the North Little Rock School Board is challenging the city’s right to take the remaining tax revenues left by the previous decision.

The tax revenues are those approved by the city’s voters for the city’s public schools and the schools need the money more than the city does.
You can see why people began to get a little nervous about their mayor’s resourcefulness. The sheer complexity of the deal raises flags.

Monday, Mayor Hays brought the land swap before the city council, where he is accustomed to getting what he wants. He lost a vote or two during the argumentative hearing and the council split 4 to 4. The mayor had to break the tie with his vote and the state newspaper reported that he was visibly angry with his council members.

Meantime, the mayor promises that the city will not put any more public funds into the development besides the school taxes that will be recouped from the city’s schools. If it doesn’t, it is hard to see how the deal can work. Also, the owner of the nearby Wyndham Hotel, who doesn’t like the city using public funds to support a competitor, says he may raise petitions and refer the whole deal to the voters. The odds are that the hotel will never materialize, but it is not safe to bet against Mayor Hays.

The most troublesome part is the city’s confiscation of school taxes to help a private business development. We have always thought tax-increment financing, although it is now in the state Constitution, violates an older constitutional prohibition against taking taxes that people vote for school purposes and using them for any other purpose. Even if the courts were to find it constitutional, it is terrible public policy. We don’t want to see it coming down the road to other cities.