Greater Baton Rouge Business Report: TIF not a 4-letter word

Since founding The Bluffs, I have had my sights on developing a flag-operated resort and conference center in the Feliciana hills. A "Plantation Country" resort can anchor a non-gambling, nature/heritage tourism industry that creates jobs and taxes statewide--and finally facilitates Louisiana's development into a Sunbelt retirement and second-home destination.

My resort vision was the basis for Louisiana's 2002 TIF legislation. In researching how other states accomplish pioneer projects, I discovered tax increment financing (TIF), a tool for public/private partnerships. Louisiana's vague TIF statutes provided for no statewide use. I asked New Orleans bond attorney Ray Cornelius to help craft new legislation. With help from DED Secretary Don Hutchinson and others, we got our TIF bill passed into law.

I intended for my resort and conference center to be the model TIF. But that was not to be. The travel downturn after Sept. 11 and other challenges have prolonged my efforts. For now, other projects are pioneering our new law. But controversy has contributed to misunderstandings of TIF, which I want to correct. TIF is critical to pooling our public and private resources, making significant anchor projects happen in Louisiana and diversifying our economy. We cannot allow misinformation to cost us this awesome tool.

Myth: TIF projects hurt children by diverting school taxes.

No. TIF projects create new taxes for schools, but the maximum benefit occurs after the public investment is repaid. Even while bonds are paid, schools receive at least the same taxes as before the project. However, TIF may have a negative impact on supplemental state funding to schools, an unintended consequence that should be legislatively corrected. Schools must be able to participate in TIFs--they lose significant new school taxes when a great opportunity is lost.

Myth: Retail TIFs don't create taxes; they shift existing taxes.

Not necessarily. Some retail projects attract customers from other places, and some stimulate and accelerate secondary development that creates taxes. Markets differ--a project might be a great rural TIF, but not for an urban one. Retail TIFs must be scrutinized to assess net benefits before determining public participation.

Myth: TIF benefits private sector more than public.

No. TIF allows government to lever-age future taxes the project creates to attract new jobs and taxes. So TIF projects fund their own public assistance, and the public invests zero current dollars in the project.

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Myth: The state should not participate in TIFs.

Economic development benefits state revenue. Since participation doesn't require existing dollars, TIFs can stretch state economic development resources.

Myth: There are insufficient checks and balances on TIF projects.

Many safeguards are in the law. Local government must agree to participate before the state will consider a project. Then the state economic development secretary must present a compelling case for state participation and win approval from the Joint Legislative Committee on the Budget. Strong project feasibility is essential, because attracting private financing and marketing public bonds require great confidence in the project's success.

Myth: TIF projects produce no immediate public benefits because paying off bonds takes years.

The public can immediately benefit even if all new taxes in the TIF district pay bonds for years. For example, with my planned resort, guests will visit restaurants, shops and attractions outside the resort, even travel to other parts of the state. Those new taxes will immediately increase state and local revenues because only taxes inside TIF districts will pay bonds. Also, 300 new resort jobs will create new payroll taxes for the state and significant new employee spending locally.

Myth: If the project is feasible, let the private sector do it alone.

The private sector won't pioneer new Louisiana industries. Business selects proven locations. To successfully diversify Louisiana's economy, we must pool public and private resources and reduce risk for those willing to take a chance here.

HAROLD LEONE is the developer who founded The Bluffs on Thompson Creek near St. Francisville. He also was founding chairman of the West Feliciana Community Development Foundation.