According to the figures presented in a JT commentary today, the Point Blue project near downtown Racine will be worth $145 million upon completion. The cost of construction, though not mentioned in the commentary, is presumably projected to be somewhat lower than $145. The developers have already received free lakefront property valued at $1.25 million and an additional $1 million for cleaning up the contaminated soil. They are also likely to receive another $21.5 million in TIF money. TIF money is money borrowed by local governments and "repaid" by developers in the form of property taxes. Since taxes must be paid anyway by property owners, the $21.5 million in TIF money is actually a gift to the developer from Racine taxpayers, via our elected leadership.
All told, the Point Blue developers will be recieving $23.75 million from taxpayers. In actuality, the sum will likely be much larger because the $21.5 million borrowed by the city must be repaid with interest. At any rate, the $23.75 million gift from taxpayers represents, at the very least, about 16% of the projects costs. This figure assumes that the cost of the project is the same as the property valuation (an unlikely scenario) and 0% interest on the government bond (an impossible scenario).
Let us put this in perspective. I am presently engaged in a development project of my own. I project the cost of my project to be about $160,000. If you, generous taxpayer, would also provide me with 16% of my costs, I could cut my costs by $25,000. This would be most helpful to me.
So we have a situation were some politically savvy developers finagle huge sums of money for their developments, financed by you and I, while you and I pay the full price for our own developments, and then some, because we are also paying additional taxes to finance other people's projects.
There is a fairer way to encourage development. First, we could lessen the tax and regulatory burden on all development. We should realize that the tax burden is too high if a developer can not profitably develop lakefront property. Secondly, instead of the city borrowing upfront for development projects, they should instead offer any citizen the opportunity to develop their properties with an understanding that the increased property valuation will not be taxed for some specified number of years. By the way, I offered this idea to Mayor Becker a few months ago.
An arrangement like this would be fair for anyone wishing to improve their properties. Additionally, it would reduce the need for developers to cozy up to government for cash. And this will not be happening anytime soon because politicians derive their power and influence by granting favors and money in return for political support.