Crescent quandary understandable

By The News Virginian Staff

Published: June 26, 2008

In an historic fit of cogency, government in 1951 produced a sound tonic for a spreading urban malady. How to inspire private developers to invest in areas blighted by economic decay, crime and failing or absent infrastructure? The solution: tax relief under an appellation hewn from the typically abstruse parlance of bureaucracy.
Tax increment financing allows government to use bonds to front capital investments for projects in anticipation of future tax revenues covering the debt. After covering the bill for sewage, road upgrades or other infrastructure improvements, government later collects tax revenues from properties that otherwise would have generated little or no public money.
For a look at how the concept has evolved, check out a 139-acre swath of land across the highway from the U.S. 250 entrance to the Woodrow Wilson Rehabilitation Center and Augusta County Schools in Fishersville. At that spot, Charlottesville-based Crescent Development wants to build 420 townhouses, duplexes, single-family homes and apartments along with office and retail space.
Crescent is seeking Augusta County government’s backing in the form of $3.7 million in tax increment financing over 12 years to pay for the construction of 2,000 feet of Route 636 to provide access from U.S. 250 to the development. Augusta would pay an additional $500,000 for U.S. 250 improvements.
This project and others in Augusta are an example of tax increment financing’s reach. Commonly known as TIF, the program was initiated in California as a way for the state to match federal urban development money. The feds eventually bailed out of the urban renewal business, but TIF accelerated in popularity. Today, only Arizona among the 50 states lacks a TIF law.
As might be expected, some people are uncomfortable with the program’s spread into places such as Augusta. TIF was used for the Hershey plant and Target distribution center in Stuarts Draft — hardly urban and hardly blighted.
Critics say such applications represent a distortion of TIF’s original intent, with government fronting money for what is perceived as a new blight, creeping development in rural locales. Further, critics charge, TIF has emerged as a kind of welfare for developers, with government financing debt that developers could – and should – cover themselves.
The first point is true. TIF was initially a mechanism for reviving cities, not building chocolate factories in the shadows of the Blue Ridge. But the argument is a non sequitur. Nothing proscribed the concept’s expansion.
The second point is more compelling but not unanswerable. Why should taxpayers finance debt that developers could finance themselves? Because development increases tax revenues and developers and government alike work in a competitive marketplace. For both sectors, TIF is part of dealmaking. For government, the questions are what will be the eventual annual payout and by what assurance?
Here is where the Crescent project unravels slightly. Developers are unsure when homes would be built because of the surplus of homes currently on the market. This casts a sharper speculative tint on the idea. County Supervisor Tracy Pyles, no enemy of development, wonders about return on investment. “Everybody needs to pay their way. It’s not up to the taxpayer,” he said.
Supervisor Wendell Coleman is intrigued by the prospect of another county interest being served to a limited extent. Officials want to relocate Route 636 and stretch the road to the Augusta Medical Center. State money for the project in the county’s six-year road plan has been cut. Crescent could get the work started, but with plenty of miles still to go to reach AMC.
County officials will take another 30 days to consider Crescent’s proposal. Their initial hesitation is understandable. So too might be an eventual rejection of the request. We like the spirit of TIF, drawing government and the private sector together to spur economic growth. But the concept carries risks. Hershey and Target were safe bets. Crescent appears far removed from a sure thing.