New idea for old schools problem
2/22/2018, 9:24 p.m.
Re “Feeding schools’ budget: City Council approves 1.5% meals tax hike for schools construction,” Free Press Feb. 15-17 edition:
If you are not involved in public finance, you might never have heard of a Tax Increment Financing District, or a TIF District.
Surprisingly, no one has previously suggested using a TIF District to help pay for modernizing Richmond’s public schools.
TIF Districts regularly are used by politicians to reward contributors who put their private money into projects like the proposed Richmond Coliseum development.
Publicly, Richmond Mayor Levar M. Stoney is mum on a Coliseum-area TIF District. But the investors know he has no choice if he wants their money.
The financial theory behind a TIF District is pretty simple: A new coliseum would generate new activity in the surrounding Downtown area. Such activity would produce new tax revenues, such as meals taxes, property taxes from increased land value and the like.
Under the TIF concept, some or all of the new revenue the city would collect — and which would not exist without the development — can be used to pay off the private construction debt incurred by investors.
Using public tax dollars to pay off private debt is often controversial. Usually, if you borrow to open a business, the debt is paid from your profits, not from the city taxes your business activity creates.
But what if Richmond could use the TIF District concept to come up with the estimated hundreds of millions of dollars it needs to renovate or replace its decrepit schools? And what if the state pitched in to support this effort?
Indeed, Section 58.1-608.3 of the Virginia Code already says the state will share certain sales tax revenues with projects like Richmond’s proposed coliseum development.
Surely schools are a higher priority. Why not share sales tax revenue on school construction materials or income taxes on the labor?
Richmond also could create TIF districts around each school to be modernized and dedicate increases in business taxes and in property taxes resulting from the improved school as a stream of revenue to help repay the borrowing that made it happen.
Bottom line: If it’s OK to create a TIF District to use public dollars to pay off private debt for a new coliseum, then we should similarly us TIF District public tax dollars to pay off public school construction.
The TIF District concept has the potential of producing $25 million to $30 million without heaping a new burden on the poor, as the mayor’s regressive meals tax plan does.
The writer is leader of the Put Schools First campaign in Richmond.