TIF: a powerful tool being overused?

About 15.2 percent of the county's taxable valuation is in TIF, according to the Iowa State Association of Counties.

TIF is a taxing tool different than regular taxes, according to Plymouth County Auditor Stacey Feldman.

With TIF, a target district in the community is outlined by the local government. The valuation of any business, structure or agricultural land within that boundary is determined -- this is the "base valuation."

Once the governmental body wants to begin collecting TIF, taxes on any new valuation above that base can be used for economic development projects in the set district. Some examples include connecting a new industrial site to the storm sewer or offering a tax rebate to a business to encourage it to relocate to the community.

Out of Plymouth County's approximately $1.3 billion of taxable valuation, $197 million is in TIF, putting the county at second-highest for the state.

With 15.6 percent of its taxable valuation in TIF, Guthrie County -- the Des Moines metro area -- is ranked first.

Sioux County is third-highest in the state with 14.9 percent in TIF valuations.

TIF: a powerful tool

Whether or not using TIF is good or bad for Plymouth County depends on the point of view.

"Benefits of a high TIF means your area is growing, developing, and it also means that you only have to pay for projects within that TIF from the increment values," Feldman said.

TIF also provides another method to finance debt.

"It's all about the how [each town] wants to develop their economic development and their infrastructure -- roads, water systems -- that they're providing," Feldman said.

But if a community TIFs something, any extra valuation cannot go toward general operation of the county "so it pulls money from one area and puts it in another area," Feldman said, which could be very damaging if the TIF value is too high.

And creating TIF districts makes money crossover less flexible in communities, which could influence which types of services can be given to residents, added Feldman.

"There's good and bad to it, it's very powerful," Feldman said.

TIF: an economist's view

Each community using TIF needs to evaluate one major question, according to David Swenson, economist at Iowa State University.

Swenson has the job of studying how TIFs are being used throughout all Iowa communities.

"The big thing that I think about is, are you creating an advantage for either one group of business people to the disadvantage of another group of business people," Swenson explained.

For example, Swenson said each community should be evaluating if TIF activity is resulting in a deterioration of downtown vitality because businesses are trying to move to another part of town.

"The biggest thing is, are we getting job growth and are we getting valuation growth, and is it the kind of pace that looks like we're all going to be better off in the reasonably near feature, or are we just kind of holding on," Swenson said. "That's the question that each community is going to have to evaluate at the local level."

Through Swenson's studies, he also stated there's no clear reason for communities, especially medium-sized communities like Le Mars, to use TIFs because, in many cases, TIF was used as pure tax rebates for a lot of firms that didn't need a tax break.

"For a lot of these medium-sized places, what we're finding is that the overall tax base just isn't growing, so growth in the TIF district isn't leading or associated with broad-based growth in the rest of the economy," Swenson said, "and I'm having trouble believing that the way that TIFs are used in Iowa is a meaningful component to non-metropolitan area growth."

While Swenson did commend Plymouth County for having a decent set of core industries, he said the problem is that the core industries aren't fast-growth industries and, in the meantime, the county has two metropolitan areas -- Sioux Falls and Sioux City -- nearby, which take growth away.

"I study the whole state, every square inch of it and TIFs are the only tool (communities) have in their book, in their tool chest they say," Swenson said. "I don't agree with that, but it is the one tool that they use very aggressively, and I don't see a very good pay off."

Ultimately, the decision of whether or not to use TIF is in the hands of each community.

TIF: Plymouth County uses

Revenue from TIF districts in Plymouth County has been and is being used for many development projects throughout the county.

TIF from the Merrill district around the ethanol plant will be used for improvement projects like replacing a bridge with a culvert at K-42 and 220th Street and replacing bridges on C-38.

In Brunsville, TIF money was set aside for curb and gutter work on the street front of Premium Feed and Grain, which expanded in the past year.

In Le Mars, TIF dollars helped pay for the extension of a rail line that will strengthen a Le Mars industry, serving the new $5 million IML Container Iowa plant. TIF money also helped pay for recent curb and gutter work on Highway 75.

Another Le Mars example would be to just look at the industrial parks, according to Neal Adler, Le Mars business initiative corporation Executive Director.

"Without the use of TIF to provide the infrastructure, it would have been difficult for this community to have that land witness so much growth," Adler said.

He does recognize that, like any law, if TIFs are misused then issues can arise but each community needs to evaluate TIF use so that they grow all parts of the community.

"I think it's a struggle for downtowns all over, but I think ours is the opposite, I think we have a very healthy downtown," Adler said. "I think that the growth has been a positive for our community."