Whom do tax rebates truly help?

re: http://www.news-gazette.com/news/politics-and-government/2012-04-30/champaign-council-consider-rebate-proposed-hotel.html

I have been reading “The Great American Jobs Scam” (hat tip to Pattsi Petrie). If what Greg LeRoy says is accurate and precise, red flags and klaxon alarms start going off in my head when I hear about any kind of tax incentive that purports to “bring in new business”. The NUMBER ONE big thing, to me, is the need for transparency and accountability. These two are inseparable. And I want to clarify that I am not opposed to tax incentives in and of themselves – rather it is the need to know exactly where our money is going and why. It is the fundamental rule of being fiscally responsible and having a budget. If one cannot account for the flow of money, one is not mature enough to handle it, IMO.


As such, I have sent the following email to the Board (and I carbon copied Dr. Wiegand and Mr. Gene Logas):

Good morning, Members of the Board,

In regards to a News-Gazette article about a new proposal to bring in a hotel to downtown Champaign, the City is planning to offer substantial tax rebates. I am not certain if school board members typically get involved in such discussions or not, but I urge the Board to get involved if they are not. It is my understanding that such a new tax rebate, if put into effect, will further reduce monies coming into the school system. It is not such much that this is a “big evil plan”, but rather this is just one more example of how public tax dollars are funneled into the hands of corporate interests and away from our children. I know each of you care very much about education and all the students, and I thank you for fighting for them.


9 Responses to “Whom do tax rebates truly help?”

  1. G. David Frye Says:

    At present, the two properties involved are assessed at a total of $80K for the land and $0 for the building – because it’s a hole in the ground. Total property tax paid on them is less than I pay. Anything that improves the property – and building a hotel is a substantial improvement – benefits the school district in the long run by restoring property tax revenue.

    It would be important to know in this case how the rebates will happen. The article says $3 million over 7 years, spread across food&beverage, sales, and property taxes. The city itself does not have direct control over the use of any portion of the property tax except what is allocated to “City of Champaign” and “City Of Champaign Township”, which looks (to me) to be about 17% of the tax bill.

    In theory the city could artificially reduce the total property tax bill by playing games with the assessed value of the hotel, once built. That doesn’t seem likely – but in any case it would help to see that any large new building is going to dramatically increase the amount of tax revenue that goes to Unit 4.

  2. pattsi Says:

    If folks would like more information about economic incentives, look at these


    Chicago Reader articles about TIF in Chicago. There are now more than 150 in the city. Those articles are also very instructive in trying to figure out what to do and how to analyze.


    Last, but not least is te Bill Moyers conversation last night


  3. pattsi Says:

    Reply to David Frye–there are so many other ways to incentivize development without giving away the store–which has hurt Unit 4 over the decades already. Take a read of the Leroy book to discover alternatives.

  4. G. David Frye Says:

    This discussion is theoretically about school district revenue, right? I don’t think this deal affects that in any negative way at all. It will only help. I have no position for or against the city spending ITS money to improve the downtown area.

  5. pattsi Says:

    David Frye, it is interesting that you view the monies as Champaign’s to spend rather than your tax dollars. Taking this logic to the next level, I assume that you would not question how the federal government spends your federal taxes since it is the federal government’s money 🙂

  6. charlesdschultz Says:

    In doing a little research, I see that Pattsi, Eric Bussell and Greg Novak weighed in on the decision about extending the East University TIF back in 2010:

    Eric also linked a NG Article that has a blurb or two about why Gordy Hulten was the lone council member who opposed the extension. Both Greg and Gordy point out that communication is a huge issue. And Pattsi implied the issue with her own questions.

    Again, the issue is not so much about whether or not TIF is, in itself, evil. In a very simplistic world, economic development that promises to generate more revenue for taxing entities sounds like a good deal. But we do not live in a simplistic world, and as we have seen, there appears to be absolutely zero accountability to see if such promises are actually met. And furthermore, how promises are enforced – what are the ramifications?

    G. David, I would shape the question slightly differently; the issue is not necessarily about school district revenue, but rather the loss of school district revenue. Mr. Gene Logas is happy to show us how tax caps have, over time, been very painful. We add that up with less and less state funding, a higher dependence on local property taxes and the picture starts to become obviously more complex. Higher complexity leads to more people tuning out when you start throwing around words like “abatement”, “levies”, TIF, etc. So the challenge is how to get the tax payers to 1) understand the big picture, 2) have a voice at the table.

    Granted, I realize I lack requisite experience in much of this, but if I had my own Utopian world, I wonder what it would look like if we had a true flat tax and if entities not only were transparent by nature, but invited and sought out open discussions about policy decisions. Or better yet, what would happen if people just honestly, sincerely cared for one another and government became obsolete? That would never happen. 🙂 Or will it?

  7. pattsi Says:

    To this day Gordy Hulten still opposes the use of the above named ED incentives. Gordy and I agree we agree on very little, except this. 🙂 Nonetheless we have great conversations particularly about WCB and TIF, just recently. 🙂

  8. G. David Frye Says:

    Pattsi, I would appreciate it if you would not put words into my mouth. Say what you want to say. Don’t twist my comments to somehow prove your point.

    I write things here VERY reluctantly, because it seems obvious that some of the participants have a lot of pent-up unhappiness with something and they’ve found this a great place to vent. My comments were specifically directed at Charles and his letter to the board, where he says, “It is my understanding that such a new tax rebate, if put into effect, will further reduce monies coming into the school system.” That view is incorrect; the new hotel will directly add to the property tax base and Unit 4 will benefit. I can’t imagine school board members speaking out against it.

    Now, it appears that some people believe there are indirect effects that somehow over time reduce the same tax base. I don’t know what to say to that. By the time we get to third- and fourth-level consequences for peoples’ actions, it’s largely a matter of opinion. Some people use the word “fact” like it was the only word in the English language.

  9. charlesdschultz Says:

    G David, I appreciate that you expressed your reluctance. I respect that. I hope you continue to visit us.

    I think we are just starting to dig at the root of the issue here. If my view is incorrect, then it is good for me to know that. However, how exactly do we know for sure what is correct? As it stands, it is my understanding that the new development will have a 7-year tax holiday (effectively), during which no new money will go to the schools. If, and only if, revenue is generated after that tax holiday, all differential monies will still not go to the schools until the TIF ends. Is this correct? If not, how so?

    I think (and I may be wrong) that the root issue has something to do with real facts and how they are communicated. If anyone (myself as a prime example) has incorrect facts, they need to be corrected. And I am going to go out on a limb and say that ignorance = guesses = incorrect facts. At least for this conversation. 🙂

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