Hoffer Debunks Another Bag of Magic Beans

The city of Burlington is in a spot of bother over “numerous errors’ in its Waterfront Tax Increment Financing (TIF) district. According to Auditor Doug Hoffer, the city owes the TIF district $1.2 million and owes the state Education Fund nearly $200,000, because it couldn’t keep proper accounts for its Waterfront TIF. He also found that the city spent $173,000 on bike path improvements that were, uhh, outside the TIF district. Since the total scope of waterfront improvements was $16 million, those mistakes add up to almost 10% of the whole ball of wax. Not inspiring, that.

But Hoffer doesn’t blame Burlington so much as the complex structure of the program itself. In a way, this shouldn’t be surprising; after all, it’s comically difficult to even explain the TIF concept in lay terms, let alone successfully manage one of the damn things.

But heck, let’s give it a shot. A tax increment financing district allows a municipality to incur debt for infrastructure improvements needed for development in the district and pay the debt out of future higher tax revenue. If it works, everybody wins. But the devil’s in the details, and there are hordes of pesky details in Vermont’s TIF program.

Whew. I think that’s in the ballpark at least, but don’t cite me as gospel. The point is, TIFs are complicated as all getout, and Hoffer’s audit indicates that it’s too much for our cities and towns to handle. In his words, ““Managing the complexities of this TIF district proved challenging for even the largest municipality in Vermont.” Says here if we can’t build a program amenable to proper management, maybe we should ashcan the whole thing.

Hoffer points out another problem: “[TIF] isn’t a cheap way to pay for infrastructure. We estimate Burlington will pay more than $11 million in interest for $32.6 million borrowed to pay for improvements.” Maybe they should have just gone to a loanshark.

This is especially pertinent when Gov. Phil Scott, who loves him some bags of magic beans, would like to expand TIF to smaller communities around the state. (He first proposed the idea in 2020; a bill creating a pilot project failed to clear the Legislature in 2022.) I mean, if our biggest city can’t handle the paperwork, how can our smaller and less resourced communities hope to do so?

Well, the answer is, they can’t. Expanding TIF would lead to more mistakes, more wastage, and less accountability.

Hoffer does suggest a better way to manage TIFs, if that’s what you’re determined to do. In policymakers’ rush to create as many TIFs as the law allowed, he said, they were quick to grant communities “specialized rules for their towns or law changes to excuse them from regulatory or auditing findings. Each time this happens the program becomes more complex and less accountable.” His prescription: stop giving exceptions or special rules, and “consider simpler, cheaper strategies for the future.”

Let’s hope so. The path for reform may be much clearer now that Mr. Incentive, former Senate Economic Development Committee Michael Sirotkin, has graciously departed the scene. He may have been second only to the governor in his enthusiasm for unproven slash unprovable incentive programs.

I doubt that lawmakers are going to kill the TIF program entirely although, given the Waterfront TIF’s unimpressive ROI, maybe they should. But at a minimum, they should take Hoffer’s advice on how to make the program more transparent and easier to administer.

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