A Wal-Mart in Kansas City, Missouri, closed on January 18, 2007. A day later, a Wal-Mart opened in another section of the city. Fair to say, these two events were related, no?
Economic-development officials at the city have pretended that the two Wal-Marts had nothing to do with each other. It's an absurd position, and it enriches a private developer at the expense of taxpayers.
The story gets a little complicated because it involves tax-increment financing (TIF), a powerful but inscrutable tool that's been used to remake huge swaths of Kansas City. But let's give it a go.
In 2005, the city created a TIF plan to assist with the redevelopment of Blue Ridge Mall. In its last days, about the only thing left at the mall, one of Kansas City's oldest shopping centers, was an Applebee's.
The property owner presented a plan to tear down the mall and anchor a new retail development around a Wal-Mart. Thrilled, the City Council agreed to provide approximately $27 million in subsidies. The money would come from the taxes the project generated once it was up and running. Such is the essence of TIF.
But when they designed the TIF plan, the city's economic-development officers disregarded the fact that Wal-Mart -- a corporation not known for its sentimentality -- might close another store when the new one opened. Which is precisely what happened. In 2006, while the Wal-Mart at the Blue Ridge Mall site was under construction, company officials said they were going to shutter a Wal-Mart near the fading Bannister Mall and move employees to the new store.
TIF is supposed to encourage new development -- not shuffle it from one neighborhood to the next. Language in the Missouri TIF statute addresses retail establishments that go skipping down the block (or highway) in search of incentives. The law puts in place a mechanism to "count" the economic activity at a former location against the new one.
So city officials had the opportunity to consider the Bannister-area Wal-Mart as the "base" for the store at what's now known as Blue Ridge Crossing. But for some reason, they didn't.
The arrangement benefited the developer, who has been able to claim that virtually all the local sales and earnings taxes collected at the Blue Ridge Crossing Wal-Mart and adjacent shops are new. A typical TIF deal returns half of these new taxes to the developer.
The two Wal-Marts came up at a TIF Commission meeting last December. During a discussion about a potential refinancing of the bonds that were issued to assist the redevelopment of the mall site, Scott Jacoby, a Jackson County finance officer, questioned the prior decision to not factor the Bannister-area Wal-Mart into the calculations.
The decision cost the county its portion of the sales taxes that the Bannister-area Wal-Mart collected in its last year of existence. The store was in decline. But we're still talking about a Wal-Mart.
Members of the TIF Commission, who are appointed by the mayor, went ahead and approved the refinancing plan. Later, an associate city attorney wrote an opinion stating that the City Council, which has the final say on TIF plans, made "no such finding" that the Wal-Mart relocation benefited directly from tax-increment financing.
It's a finding that requires some imagination. When the Bannister-area Wal-Mart closed, a sign on the store directed shoppers to the new location along U.S. Highway 40.
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The TIF skeptics just had their heads handed to them at the polls three days ago. Any screwing on the new council will not be toward head straightening.
The government planners can never factor in all their desires into law, or ordinance, or TIF deals. This corporatism from rent-seekers (Wal-Mart in this case) always end up winning, the taxpayer losing, and not because the planners are dumb or smart, but because it is a fools errand to try these schemes in the first place. It predetermines winners, and everyone else necessarily loses. Target these officials next election, run people instead with their heads screwed on straight.
The government planners can never factor in all their desires into law, or ordinance, or TIF deals. This corporatism from rent-seekers (Wal-Mart in this case) always end up winning, the taxpayer losing, and because the planners are dumb or smart, but because it is a fools errand to try these schemes in the first place. It predetermines winners, and everyone else necessarily loses. Target these officials next election, run people instead with their heads screwed on straight.
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