TIFs the Season

Should local government subsidize suburban growth?

What should we change about Knoxville in 2008? Surprisingly, I’ve had a pretty hard time coming up with something, particularly with regard to my pet issues of downtown and center-city redevelopment. As last issue’s Year in Review made clear, Knoxville’s center city made significant strides in 2007, despite the general real-estate downturn. I’m particularly happy to report that redevelopment is rippling out from downtown, weaving once forlorn neighborhoods back into the city’s overall fabric. Perhaps even more promising, the city, with its South Waterfront, Cumberland Avenue, and Downtown North initiatives, is taking some pretty serious steps to nurture inner-city Knoxville’s nascent renaissance.

But just when it appeared that “keep on keepin’ on” was the only advice I had to offer, developer Tim Graham got an early Christmas gift from County Commission: $5 million in tax-increment financing to support his proposed Willow Creek shopping center on Maynardville Highway. Graham justified the subsidy by claiming the $45 million retail development just north of Halls “will spur other development across the street and down the road.”

Graham’s got it exactly backwards. Look around at Knoxville and Knox County and you’ll see local government essentially fighting two big battles. Out in the county, the biggest challenge is funding to keep up with the ever-increasing demands imposed by new development: school overcrowding, traffic congestion. The city, meanwhile, struggles to maintain services with dwindling assets as wealth and population flow outward, propelled by sprawl. In fact, the county gets gouged twice. Not only does it have to meet the demands imposed by sprawl, but the blighted areas abandoned in sprawl’s wake also eat the heart out of its tax base.

That’s why TIFs make sense in the inner city. They provide the gap financing to put an underutilized asset back into economic production. That may require some infrastructure improvements, but it also utilizes a lot of other infrastructure that, due to the area’s blight and abandonment, may not currently be used at full capacity: roads, schools, utilities, even housing stock. The economic activity generated by the TIF-subsidized development also increases the value and productivity of surrounding properties, exemplified by how downtown’s success has spurred increased investment and higher property values in the neighborhoods around it. TIFs, in the center city, tackle the budgetary problem at its root, reversing decades of disinvestment.

A TIF like Graham’s, however, doesn’t do anything to treat the causes of local government’s budgetary woes. It doesn’t even treat the symptoms. If anything, since the soon-to-be shops at Willow Creek will be “a catalyst for development along Maynardville Highway,” it makes the symptoms worse. Rather than recapturing a past investment in an existing asset such as a condemned building or abandoned brownfield, Graham’s TIF can only encourage more sprawling investment the community can scarcely afford. It may even lead to additional blight, as displayed by Knox County’s increasing count of abandoned big-box stores.

Subsidies for suburban developers are hardly new, however. It’s just that previously, when the city and county wanted to subsidize a suburban development they simply cut a check. That was certainly the case with Turkey Creek or Graham’s own South Grove. Both developments benefited from several million dollars in direct subsidy for roads and other infrastructure, something critics of downtown subsidies frequently ignore.

I have to give Graham credit, though. By taking the subsidy in the form a TIF, he’s made them an issue. And that’s a damn shame. Not only does it compromise a truly useful tool for center-city revitalization, it clouds the larger issue, one whose consideration could truly make Knoxville and Knox County a better place. Why, with local government struggling to keep up with rampant suburban growth, are they subsidizing it at all?

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