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Do we really know how to improve the tax base?

Tax base and the economy.

Tax Incremental Financing (TIF) was originally designed to economically upgrade what were at the time called slum districts.


The basic assumption was that the construction of new homes and/or the upgrading of existing homes, would bring about an increase in land values and thus encourage new development, especially if the district was adjacent to a fairly stable neighborhood.   


Although this concept served to show interest in the poor, for obvious economic reasons, its application didn't really increase land values and where it did, it displaced the poor who it was meant to serve.


TIF was later seen as a tool for upgrading the commercial centers of small towns. Such subsidies as streetscaping and upgrading of facades gave the appearance of progress.


However, there is no magic way to manipulate the market, as it is its own force. Those working to intervene in or to influence the market from its edge, better be equipped to deal with the force of the stream.


TIF is one of those edge of the stream tools. It was designed primarily, as I've indicated to raise the value of land where the market may be working in the opposite direction, keeping it near the bottom. Its application didn't work too well there.


Many communities have used the natural rising values of land to pay for the infrastructure of those future values through the use of TIF.   It has usually been successful in an upward market in these cases.


Shorewood has become a high cost land area as a result of a large proportion of highly valued single family homes within the community and the sustained demand for this use. 


The influence of these land values throughout the area however, makes it difficult for duplex and apartment uses to thrive here long term, although for various reasons, many were built here in Shorewood.


Even though commercial uses can usually cope with high priced land, where there is a high demand for commercial services, Shorewood has not, over several decades, been able to create that demand.


It seems that it has become the assumption among officials of Shorewood that it could attract businesses by using TIF for both improving the infrastructure and appearance of the “business district.”


Under riding this theory is the urge to both increase the tax base and to increase its commercial portion so as to gain more property tax revenue, relieving some of the tax bill for residents.


This is the stance that our re-seated incumbent trustees have taken and recently stated and have for some time accepted.  They've indicated their desire to continue working in this same direction in the future.


However, most commercial development is dependent on rent received. Rent is governed as to its attraction of business in the given area. Here rent must carry the high cost of land but the district  should have sufficient business to pay these rents.


As TIF is the tool dedicated to raising land values, it is difficult to make it function in the direction of rent reduction without outright subsidies. 


In an economy that is likely to remain at a low ebb for the next five years and even if it begins to rise slowly during this period, it is unlikely that the use of TIF is going to work as a tool for lowering rents.


A thriving business district is based on reasonable rents and its attraction for clients. Our present approach and the present state of the economy tends to prevent movement  in that direction.


What do we do for the next five years? Can TIF be used as a tool for improving the nature of our business district during this time? Is increasing the tax base an appropriate goal during this time, as our trustees have indicated?


What do members of the Shorewood Board of Trustees know that the rest of us are not privy to?   Do we really know how to improve the tax base?

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