North Carolina's new deal

With tax-increment financing now in their war chest, state's developers sharpen pitch
Charlotte Business Journal - February 18, 2005
by Ken Elkins
Economic development officials in the region are eagerly awaiting the payoff from Amendment One, a change in the N.C constitution approved by voters in November.
Widely known as tax-increment financing, the technique allows local governments to issue bonds without a referendum to pay for improvements at development projects. Tax receipts from the resulting development are pledged to service the debt.
"It's a flexible tool that can be used in a variety of ways," says Kenny McDonald, senior vice president at the Charlotte Regional Partnership.
The financing technique could be used for parking facilities in downtown Salisbury, infrastructure for a business park in Anson County and the redevelopment of many closed textile mills in the region, proponents say.
"It can set the path of progress for the community," says Jeff Brown, partner at the law firm Kennedy Covington Lobdell & Hickman.
The funds can be used for improvements to a site, such as sidewalks and parking decks downtown or water and sewer service for a rural project.
A common tool
Before the success of Amendment One at the polls, North Carolina and Arizona were the lone states without tax-increment financing.
South Carolina has long used the tool. In Rock Hill, business parks have been built using TIF bonds, parks that have succeeded in luring office and industrial tenants to the state.
"I want to be able to have the choice to use it," says Robert Van Geons, executive director of the Stanly County Economic Development Commission.
Stanly County can't really compete with more prosperous counties on local incentives. But with tax-increment financing and other local inducements, the county's prospects will improve, he says.
"It gives us one more tool in our arsenal in times when we need to put together a more complete and comprehensive package," Van Geons says.
Anson County can use the financing to develop business parks as a way to attract industry.
"In Anson County, there's not a lot of redevelopment needed," McDonald says. "They need product," such as industrial parks and speculative buildings to lure development.
In an urban setting, a new parking garage could be built to bring shoppers back to the center city, he adds.
"We're excited about it because it's a tool that will be used in a variety of ways around the region," McDonald says.
In Monroe, Chris Platé, economic development director, is working with other city employees to write TIF project guidelines. "We're looking at the way it can be properly used without allowing frivolous projects to go through," he says.
Generally, Platé and other economic development officials see tax-increment financing as another inducement, much like incentives, to create jobs and growth. "Any additional tools we have to work with are good," Platé says.
Without tax-increment financing, dozens of development projects in South Carolina would not have been built, says former S.C. Gov. Jim Hodges.
"Tax-increment financing in our state is a good deal," says Hodges, a partner at Kennedy Covington Lobdell & Hickman.
In South Carolina, 33 TIF districts were created, ranging from the TechPark business park in Rock Hill to Broadway at the Beach, a shopping and entertainment center near Myrtle Beach.
Speaking at a December seminar in Charlotte on Amendment One, Hodges suggested local leaders show public officials projects that worked in South Carolina.
"Elected officials, by nature, are very risk adverse," he says. "Elected officials, when asked to make a decision like this, take great comfort in knowing that somewhere, some place, a project has successfully been done very much like the one being requested."
Because public debt can be issued for TIF projects without a referendum, Amendment One faced opposition from fiscal conservatives and others.
There's also concern that developers, rather than the general public, will be the main beneficiaries of the financing.
One opponent, Michael Joyce, a member of the Cary Town Council, has set up a Web site to chronicle any misuses.
"The abuse across the country is evident," says Joyce. He was particularly interested when a recent John Locke Foundation newsletter told how Charlotte was considering the financing for arts projects.
"When I read that article I said, 'Here it goes.' That's not what proponents sold it to us as. They billed it as a jobs and economic-development tool."
Joyce says N.C. cities and counties might be tempted to use TIF financing to replenish public coffers.
"A lot of governments are spending cash on hand and being forced to use TIF later," he says.
The Web site, www.nctifuse.org, is designed to show voters how Amendment One bond revenue is being used. Citizens can contact their local representatives if they object, he says.
"I want it to be a place that we can go and see what's happening across the state," Joyce says.
Bruce Thompson, Raleigh partner at law firm Parker Poe Adams & Bernstein, thinks such concerns are unwarranted. The financing uses a modest amount of public debt to stimulate development and boost tax revenue.
"It's almost a pay-your-own-way deal," he says.
Staff Writer Ken Elkins can be reached at (704) 973-1114 or kelkins@bizjournals.com