Slam dunk | Arkansas Blog

Thursday, April 26, 2007

Slam dunk

Posted By on Thu, Apr 26, 2007 at 2:41 PM

It is a sad day for Bruce Burrow, NLR Mayor Pat Hays, Rogers wheeler-dealers, the Arkansas Municipal League and others greedily hoping to take school taxes for private development schemes.

It is a happy day for public schools.

The Arkansas Supreme Court today held that the 25-mill base school property tax required by Amendment 74 cannot be taken under the redevelopment Amendment 78 to support private projects in Tax Increment Finance districts. In these TIF districts, taxes generated by increased property values from new development can be diverted from the normal tax beneficiaries (schools, local governments) to the private projects.

We've been saying this for months. Sorry, Atty. Gen. McDaniel. You're going to have to apologize to Patron Burrow.

Without the big school taxes to draw on in NLR,  the Bass Pro project envisioned by Bruce Burrow (he also of the Jonesboro mall TIF) becomes an even longer shot. (Don't expect Bass Pro to pay its own way; it doesn't do it anywhere else.)

This is a victory for the plain language of the Constitution. The court said when the campaign was mounted for voters to approve the redevelopment amendment, nobody ever mentioned that school taxes could be tapped. This was by design, of course. The Municipal League sold the amendment as a little old government cleanup to allow some short-term borrowing or lease-purchase of dump trucks, expensive copying machines and other big-ticket items. The real purpose became clear only when TIF projects started sprouting like acne in all of the most prosperous cities in Arkansas. See, that's the only place they would work. It never was about redevelopment of blighted areas. The redevelopment law was written to allow people like Burrow to get taxpayer subsidiues even to build on previously undeveloped land and to do so in places where success was guaranteed.

The court made quick work of the argument that Amendment 78 repealed Amendment 74. "...if the authors of Amendment 78 had meant for that amendment to repeal Amendment 74 in any form or fashion, they would have said so explicitly." And it said it was beyond the legislature's authority, in several attempts, to make statutes somehow override the constitution and make this money available for TIF districts.

Next question: Is there money now to be refunded from TIF projects already underway? Jonesboro is one big question. A Paragould movie theater used TIF financing, but I think they set up a cautious secondary financing mechanism to prevent problems should the court not back the expansive TIF interpretation pushed by developers and their friends in the legislature. And what about the big Fayetteville project on which this case was based. The city argued these TIF districts wouldn't work without school taxes, expected to provide the lion's share of the money. What now?

UPDATE AND CORRECTION: On a re-reading and a conversation with a lawyer who worked on the case, I now believe the Supreme Court didn't go the full distance on the TIF issue, though it went pleasingly far. It seems to have approved the use of school millage, to the extent it exceeds the 25 base mills and any mills pledged to debt, for TIFs. That will be non-existent in many school districts and negligible in most others. But, in Fayetteville, where voters make a big effort for schools, the city can capture the increased assessment on 7 mills worth of school property tax for downtown redevelopment.

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