Iowa City Patch City Manager Interview: Part One, On TIF and False Economies

Iowa City Patch sat down with Iowa City City Manager Tom Markus last Thursday and talked with him about a variety of subjects, including high density apartments, maintaining neighborhoods, and the trouble with TIF.

In this installment, we ask Markus about his philosophy on government involvement with encouraging or discouraging growth, and how that relates to the recent TIF controversy.

(Editor's Note: This is an abridged and edited version of the interview)

Iowa City Patch: What is your general philosophy on how a city should either encourage or discourage growth?

Tom Markus: My general philosophy is that you have to evaluate the growth that you're trying to encourage, find out if it fills a need, which means that you need to test the market place first to see if there is a need for what you are trying to attract to your community.

Growth for growth's sake is something that happens an awful lot in this country, and a fair amount of work needs to go into the growth decisions and the growth analysis before you just start pursuing it: analysis that will help you decide if it fills a need, if it adds value, if it doesn't detract from what is there. You really need to do your homework first, especially if you are going to offer incentives to encourage growth.

Iowa City Patch: Can you give me a tangible example of positive growth versus negative growth?

Markus: If you call up any of the major businesses -- say Menards, Home Depot or Lowes -- they do a market analysis before entering into an area, and the result of that market analysis determines if the area can support a facility of that size.

Governments at times get themselves into the business of trying to attract business, and it isn't based on that kind of an analysis. So they then end up incentivizing to a level that creates sort of a false impression or a false economy of what's going on. So, free enterprise, when they have to make the investment decision, they are making that decision on what they think that return will be for their investment. If governments are not careful, they (the government) can get themselves into a situation where they have created an environment that takes away from that analysis. 

Iowa City Patch: Do you feel that TIF (Tax Increment Financing), the way it is being used now, is part of that false environment?

Markus: Yes, absolutely, that's exactly what I'm talking about. Those things, the use of incentives, really have to be measured, and their use has to be measured.

One of the reasons that I think TIF is set up, especially in legally defined slum and blight conditions, is that businesses and developers will naturally migrate to the path of least resistance, both in terms of government regulation and green fields. And so, in places where you have an older community that has older infrastructure, there may be times where that government needs to level out the playing field a little bit so you're as attractive as a green field is. That's a case where incentives can be used.

I think you create just enough incentive level the playing field to get them to reinvest in the core area. Now "just enough" is hard to judge, there is some subjective analysis that goes on there. But beyond that then, if we just allow development to grow into green fields, then there is going to be this constant obsolescence of anything that gets to a certain age, and everything just keeps moving. Quite frankly, the country in a lot of places has done that, and our core cities in a number of places have suffered. I've watched that in Detroit, clearly, in the inner suburbs. 

That that is a challenge is a core city like Iowa City. You have the potential tax base erosion, and at the same time we're providing services beyond our borders. We're taking on regional responsibilities when we don't have an obligation to do that but historically that is what we have done. 

Iowa City Patch: When it happened, you were fairly critical of the Coralville using TIF to, I guess I'll use the word lure away from .

Markus: The politically correct term for it is business migration.

Iowa City Patch: They encouraged business migration to their Iowa River Landing Spot. What do you feel was wrong about that use of TIF, and do you think in the current discussion by the legislature enough is being done to prevent that from happening again.

Markus: I think they are working on it.

The way I look at state law, and even local ordinances, is you try to develop those laws and those ordinances to reflect what the community values are, and I think they are trying to do that based on what they know. But legislation is a complex process that doesn't necessarily always get it right the first time.

There is always unintended consequences to laws that you pass, and you just have to be cognizant of the fact that there is no perfect law or perfect ordinance because they impact people differently. You know people if they are aggrieved, or they really have a strong interest to pursue something, they're going to keep bouncing against that law. I expect people, in general to represent their self interests. If you know all those interests, you try to search for that common ground.

There is a general consensus of that while the city of Coralville was probably cleaning up, doing just what I said about cleaning up a blighted area, there is some question that there was a market to bring it to that. 

Without getting to a point where we just revisit the whole issue all over again, I think that's part of an evaluation, if you go into an area, if you're going to clean up an area, is there the market share to bring into that area from outside something that we don't have. Otherwise, is it added value, or is it just moved?
 
You have to be careful to respect the individual roles of the private sector and the public sector. While we have a role in making sure we are viable economically as a government and as a city, you have to be careful not to step so far across the line into the developer's role, or into the private sector's role.