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A troubling tax subsidy

The vacant land that used to be home to Geneva Steel.
The vacant land that used to be home to Geneva Steel.
Deseret News archives

Decades ago, politicians created the concept of the redevelopment agency with one specific purpose in mind. Governments could take areas that were blighted (inner-city ghettos, primarily), attract a developer to build something nice there, then subsidize part or all of that development with money that would be paid back by the taxes the new development generated. The idea was to add value to land that otherwise would be a drain on community resources.

But as with many government programs in which politicians can dole money to private interests, this one has spiraled out of control. Now there are many variations of such agencies. In Utah alone, they have been used to fund professional soccer stadiums, and by cities along the Wasatch Front to lure retail shopping centers away from neighboring cities. They circumvent the free market and saddle taxpayers and, worst of all, school districts with costs that remain hidden from view.

The tiny town of Vineyard, in Utah County, now is considering whether to allow a redevelopment agency to help a developer build a mix of homes, offices, retail and industrial projects on the site that once housed Geneva Steel. City leaders ought to reject this, at least at the amount proposed, for a variety of reasons. While it may be legitimate to use tax money to clean the blighted site of the old steel mill, or to attract businesses that bring new people to the state, the free market, not tax subsidies, ought to determine most of what goes on that site.

Instead, the proposal would leave the Alpine School District shortchanged. That is because part of the subsidy would come from money that normally goes to schools. It would be tied up for 35 years while new housing adds to the burden of students who need to be taught.

In 2010, the Utah Legislature passed a law that further perverts the initial purpose of a redevelopment agency. That law allows taxing entities involved in creating a redevelopment agency to make the base year for calculating the subsidy retroactive. In this case, calculations would be made from 2006, a time before a Rocky Mountain Power plant and a FedEx shipping facility were built on the site. This means taxpayers would be subsidizing those developments retroactively.

Utah taxpayers already fund multiple redevelopment projects today without much awareness. A few years ago, a Salt Lake County official proposed that state lawmakers make this more transparent. He wanted cities to take full responsibility for all the costs, with the levy appearing on tax notices. Lawmakers wanted no part of that plan. Transparency would likely put an end to most redevelopment projects.

As it now stands, each project includes subsidies from taxes that otherwise would go to school districts, the county, the state and many other local districts that fund everything from libraries to mosquito abatement. In a real sense, residents of St. George end up paying a small portion of their state taxes to fund projects in, say, South Jordan. And because it is hidden, few people know enough to complain. When one city subsidizes retail, it often forces retail away from a neighboring city, or even from elsewhere within the same city. This also creates a hidden cost to taxpayers.

If Utah County has a demand for housing, shopping or businesses, the market should decide where they go, and they should contribute taxes to the programs and agencies that serve them. For Vineyard to give any more than what it would take to clean the Geneva Steel site would be wrong.