Thursday, October 13, 2005

Tax Increment Reinvestment Zones...

Interesting article in the Houston Chronicle today about Mayor Bill White reviewing Houston's 22 tax increment reinvestment zones: Mayor plans review of tax zones' funding: In call for better oversight, White says the city's 'first obligation is public safety'

Tax increment reinvestment zones (TIRZs) are "special districts created by City Council to attract new investment to an area. TIRZs help finance the cost of redeveloping or encouraging infill development in an area that would otherwise not attract sufficient market development in a timely manner. Taxes attributable to new improvements (tax increment) are set-aside in a fund to finance public improvements in the zone. Zones in the City of Houston have been created for one of three reasons:
-1- to address inner city deterioration;
-2- to develop raw land in suburban fringe areas; or
-3- to proactively address the decline of major activity centers "

The idea is that as development comes to these zones, property values will rise - then the resulting tax revenue above a certain base level is directed back into the zone to fund infrastructure projects and other improvements to attract more private investment.

Mayor Bill White wants to reduce funding to some of the city's tax increment reinvestment zones as part of a move toward better oversight of their success at nurturing neighborhood development.
White, who's hinted for months that his administration would more thoroughly examine the 22 such zones, known as TIRZ, gave a memo Wednesday to the City Council broadly outlining a plan to re-examine them.
He wants to ensure that they're spending wisely and not wasting money that could go to police and fire budgets.

The Mayor is not making an argument here that TIRZs are ineffective or obsolete completely. Just that certain areas have outlived their usefulness. Therefore, he plans to have some zones get smaller increments in the next year, while others would go dormant.

I think that this is really good for Houston in two ways. First, there are areas that have developed well and are very commercially robust. It makes sense that those areas are in much less need of the TIRZ status. If you click here, you can access a PDF map of Houston with each of the zones outlined. Areas such as Greenspoint, Uptown, Memorial City, and I would also include Upper Kirby are areas that are absolutely burgeoning with business and rising property values. Those areas have much less need of TIRZ status, and it makes sense to use the monies earmarked for those areas elsewhere. The second reason the Mayor's plan is a good one is this: it gives the City more flexibility. The Mayor's idea is to take that extra money and invest it back into basic city protection services: police and fire. Of course that can't be a bad idea. But I would propose this: shorter-term, rotating TIRZs. This way, you could provide targeted tax incentive-ized investment to neighborhoods who need it for specific projects, then when those projects are complete, that TIRZ would expire, and could be used in the next neighborhood of need.

Instead of slowly phasing out the idea of TIRZs completely, my proposal would allow for more neighborhoods, and neighborhoods in greater need to benefit from the program - which would bring more benefit to Houston long-term. The Mayor's plan is definitely a step in the right direction. But hopefully, he will have a vision to provide more opportunities to more neighborhoods going forward.

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