Tax Breaks for AAC Worked So Well the First Time, Let's Do More!
So hard to keep up. Last week The Dallas Morning News said in an editorial that the special tax-break district around the American Airlines Center basketball arena has been a major success.
I thought most of it had been repo'd by a bunch of krauts.
The News said in its editorial, "the Sports Arena TIF has been very successful: Since the late 1990s, when the area was a virtual wasteland, there has been a more than 2,000 percent increase in property values."
American Airlines Center
Wow. And here I remembered reading in 2009 that an outfit called US Treuhand based in Hamburg, Germany, had repo'd most of the developed portions of the project from Hillwood, the Fort Worth company run by Ross Perot Jr. (And by the way, I can use the term kraut because I have a German surname myself, so it's self-deprecation, not bigotry. Ha.)
Time out. You might be asking yourself: What the hell is this even about? Excellent question.
We need to go back to the concept of the tax-break district, which, of course, is not what they call it, because people don't like to advertise the fact that they're getting big tax breaks. So it's called a "reinvestment zone" or "tax increment finance district" (TIF).
Works like this. You buy a bare lot. You intend to build a new house. The city will require you to put in new curbs, sidewalks, driveway, plumbing out to the alley and also pay for inspections and stuff. Pretty hefty tab. Let's say in your case it's going to add up to about 20 grand.
You say, "I will pay for all that stuff, and I will also pay my taxes to the city. But let's create a reinvestment zone around my house. The city will collect taxes from me for X many years. When those taxes reach a total of $20,000, the city will give me back all that money to repay me for the infrastructure I had to put in."
Suhweeeet! Why don't you do that? Oh, I forgot. Because you can't do it. They don't have reinvestment zones for people like you. You just need to pay your taxes and shut up about it. Reinvestment zones are for people like Ross Perot Jr.
The thinking is that reinvestment zones give a Ross Perot Jr. the incentive he needs to invest in an area that would never see investment otherwise.
That raises a question: Why would we want somebody to invest in an area that would never see investment otherwise?
Why not encourage them to invest in an area where everybody else is investing, so they can help create even more action there, drive up property values and increase tax collections for the city?
As far as I can tell, the theory of reinvestment zones doesn't stretch out that far. I've never seen a single soul put a sharp pencil to it and ask the question, "Are we net ahead on any of this?"
Instead they say, "Shiny new buildings! Shiny new buildings!" People applaud, peasants form circles in fields and dance, end of questions.
So, anyway, the News announced that the Sports Arena TIF has been a huge success, which I found surprising, because of the deal with the ... uh, Teutons. And I will tell you in minute why any of this was even up for discussion (grasp purse firmly or put hand on wallet while waiting).
I looked at the 2008 annual report for the Sports Arena TIF, a year before the contretemps with the short-for-Geralds, and compared it with the annual report for 2011. The first thing that struck me was the arena itself.
Valued in 2008 at $400 million — about what it took to build it — the arena was valued in the 2011 report at only $184 million and change. It appears to have lost almost 54 percent of its worth in a mere three years.
But maybe that was a fluke. I looked at the W Hotel and Victory residences development. That was down 42 percent in the same period. The Victory Plaza buildings, which still seem to be owned by Hillwood, are down 60 percent in value in three years.
If this is success, we should all hope never to achieve it.
In fact, I finally gave up trying to dope it out by individual properties and jumped ahead to the summaries in both reports.
In 2008, the total value of all taxable property in the Sports Arena TIF was $574,257,867. In 2011 it was $405,477,911. That's a dive in value of 29 percent.
Tough times, you say. Everybody's been hurting. Mm, maybe. But let's look at it. In that same period, the entire tax roll for the city of Dallas decreased in value by 9 percent.
So the Sports Arena TIF, this blazing success our only daily newspaper tells us about, has been sucking wind at a rate more than three times worse than the city overall. And now I think this brings us back to your hands on your purses and your wallets.
Why are they even talking about this stuff? And why are they saying the opposite of the truth about it? Is that a good sign? Or probably not?
When these districts are created, they have a timer running on them. A TIF district builds up a kind of escrow account of tax payments that it can get back — that is, the developers can get the money back in the form of a great big check — but only for a set period of time. If it went on forever, 100 years from now the descendants of Perot would all be in Peru collecting pre-Columbian pots and waiting for their TIF checks in the mail. If the peasants found out about that, they might stop dancing.
So the reason this is coming up now is that the Sports Arena TIF is about to expire. Formed in 1998, it will have lived out its legal life expectancy next December. And what should that mean to the rest of us?
Three million bucks a year. According to the city's Department of Economic Development, if the Sports Arena TIF expires this year, the city will start putting approximately $3 million a year into the general fund — money it has been required to escrow for the TIF developers during the life of the TIF.
Is that a lot of money? Well, you tell me. It's three million bucks a year. The city is broke. It can't mow the parks. It seems like real money.
At their most recent meeting, the directors of the Sports Arena TIF voted to ask the city to extend the life of their TIF beyond its expiration date in December of this year to December 2028 and basically double the amount of tax money to be paid back to developers in the district. So if the City Council approves that idea, we won't get our $3 million.
And that would be why? (Our hands are clasped a little tighter on our billfolds now, I trust.)
Inside and outside City Hall, there seems to be general consensus that the Victory development is sucking wind because it was built back-asswards. Nobody wants to say it for attribution, because they're all so terrified of Hillwood and the Perots, but basically the whole place comes across like a cross between Mussolini's Palace and the pyramids at Giza.
Now they have decided as a kind of work-around to turn the place into more of a neighborhood by building apartments. In order to get space for the apartments, they have to build a parking garage for the arena.
There has also been talk of building a retractable roof over the main plaza, so that visitors in the summer months won't feel quite so much like ants trapped in a gigantic microwave. That might help.
But with values pretty much tanking and all, the developers don't feel good about paying for the parking garage and the retractable roof themselves. So they thought maybe we would want to pay for them by not taking our $3 million a year.
We? Pay for a retractable roof for a huge plaza? Really?
These tax break districts are supposed to be public entities. Just for grins, I tried over a week to get contact information for the Sports Arena TIF directors from Tamara Leak, the city employee who is the keeper of such data. She never called me back. But no mind. That just goes with my territory. It's my job to find people anyway. I worry what happens when a regular taxpayer tries.
I did manage to catch Jay Annand, a developer/director on the TIF board, on the phone briefly. When I got to the part about the retractable roof, he said, "Tell you what, can I give you about 10 minutes and let me call you back? Give me your number. Give me about 10 minutes, I'll call you back."
Couple days later I got him on the horn again to talk about the roof. He suggested I call Tamara Leak. I said that wasn't going to pan out. He said he would call her for me, and then he said, "All right, Jim, thank you so much, bye bye."
So here we have this massive development that was built where no one else wanted to build. We subsidized it. It got repo'd by Herr Gerald. Since then its values have plummeted. And now we need to bail it out again. Why?
Ah, the inducement. The people on the TIF board — like the politely elusive Annand — say that if we taxpayers will subsidize them for another 16 years, they will expand the territory of their TIF to include the vacant industrial properties in West Dallas at the foot of the new Calatrava bridge. So then we can subsidize that area too.
Gotta admit. Nothing going on over there. No visible signs of serious investment. Your basic burnt-over hellscape. Looks like our kind of deal, eh?
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