Friday, January 19, 2007

more tif

I might have over-simplified my explanation of TIF yesterday. Using an analogy of fixing up a falling down house, I explained that TIF is based on the estimate of how much tax revenue a fixed-up house would generate. And then the so-called "new revenue" -- the difference between the lower taxes for a run-down shack and the higher taxes for a remodeled palace -- is funneled into the development. That's before the so-called new taxes come in.

This explanation gives the impression that all of the imaginary money goes into the actual development. Like, if you're gonna deck the sheck out in Itallian marble, the taxes pay for the marble. That's not entirely true. In theory, the money goes toward stuff one would ordinarily expect a city to pay for, like new roads and sidewalks around the project, and sewer lines and such. And some of the money does. (more on that later.)

But some of the money actually does goes to the Italian marble, so to speak. For instance, with this TIF for a luxury hotel in Kansas City's richest neighborhood that the council hurriedly approved last week, some of the predicted tax money is going toward meeting spaces in the luxury hotel.

(Not exactly what I like to see my hard-earned money spent on. But who am I but an honest taxpayer, and therefore worthless in the eyes of those who approve such deals.)

But here's something you never read about in the newspaper: A lot of this TIF money goes to lawyers.


And that's a BIG reason why TIF is used so much. It's a guaranteed revenue stream for a handful of politically connected law firms in town.

Here's something I wrote in the aforementioned PItch article on Wesley Fields:
Bryan Cave has earned more than $800,000 from the TIF Commission over the past three years. Fields alone has billed more than $400,000. And he continues to work for the TIF Commission even as he runs for office.

Fields is quick to point out that this isn't taxpayer money his firm is earning. He says that "approximately 90 percent" of the firm's bills have been paid by developers involved with TIF projects.

But Fields' legal bills show that's not true.

The Pitch compiled a database from 373 Bryan Cave invoices and found that half of the firm's bills were paid out of the TIF Commission's general fund, an observation confirmed by Laura Whitener, the TIF Commission's top administrator. That fund is made up of 5 percent of the taxes created by new TIF developments -- in other words, it's public money.

The TIF Commission's public meetings, at which developers pitch schemes to build parking garages, luxury hotels and, in one instance, a McDonald's, have been particularly profitable for Bryan Cave. During the first two years of its contract, the firm sent two lawyers -- Fields and Stephen Sparks -- to prepare for and sit through the meetings. "There are some times when you need to have an attorney at the table," Whitener says. "You're never going to be able to predict those times."

From March 2000 through January 2001, the two lawyers' administrative activities earned their firm more than $50,000. Since then, the TIF Commission has cut back to having just one lawyer -- Fields -- present at its meetings.

But even the other half of Bryan Cave's bills, the ones supposedly paid by developers, are eventually reimbursed with public money as well. That's because current TIF policy allows developers to include legal expenses in their TIF financing agreements, labeling them "soft costs." Moreover, developers may also be reimbursed for hours billed by their personal lawyers.

"It's a sleight of hand," Nace says. "The developer doesn't own the taxes his project will generate. It's not his money. It's taxpayer money. On the Finance and Audit Committee, we're working right now to limit the amount they can be reimbursed for soft-money expenses. And we're getting a lot of resistance."

As early as 1982, city leaders knew that the legal expenses of the Economic Development Corporation, which provides staff for the TIF Commission, were straining the city's budget. A report issued that year by the Cleaver-appointed Citizens Budget Review Committee recommended reducing those expenses by $100,000, even though back then they were a mere $155,000 a year. Instead, the council voted to increase payments to lawyers. Now attorneys are making millions from the EDC.

A 1999 Star article cautiously suggested that these contracts are doled out as part of a patronage system. With minimal notice to the public, the EDC board met off-site to retain the services of Bryan Cave and the King Hershey law firm. Lawyers at both firms contributed heavily to Mayor Kay Barnes' campaign. Bryan Cave senior partner Herb Kohn, for example, is one of the mayor's chief allies. Kohn has billed the TIF Commission for more than 200 hours -- more than $35,000.

Although this money creates potential conflicts of interest, Fields promises that as a City Council rep, he will shape TIF policy based on the community's "collective vision." It's uncertain how he would accomplish that given that he would have to step aside from many of the TIF debates at City Hall.

"If we still have the contract at the time, he would be, directly or indirectly, a beneficiary," Kohn admits. "He'll probably want to recuse himself, but that's a decision he'll want to make at the time."

In other words, TIF creates a new trough along the City's revenue stream for lawyers to feed on. They don't even have to work for it, because there's no bidding process. And the only incentive is for them to push more TIF projects, because that makes the trough bigger. (BTW, that story won honorable mention in the 2003 Missouri Press Association Excellence in Journalism contest for "Best Coverage of Government," a category in which I also took first place for a package of three stories.)

And please note that the TIF money pays for not only the TIF Comminssion's lawyers, it also pays for the developers' lawyers. Such a sweet deal, huh? Make's you think twice about law school, don't it?

So there's really NOBODY representing the public good (more on this later, too). There's no incentive to. Bryan Cave represents the TIF Commission, which gets all of its money on a 5 percent commission of all TIF projects. So, more TIF projects, more money.

It's just that simple.

And that, folks, is why the city has no TIF policy. Because if there were a TIF policy, the folks on the City Council's Finance Committee -- three of whom are running for mayor -- would have to decide when and where TIF projects will happen. And that could cut off the money trough for the developers and lawyers, all of whom make healthy campaign contributions to the committee's three mayoral candidates -- Al Brooks, Chuck Eddy and John Fairfield.

It's weird that reporters think this stuff is boring. It's straight-up graft. It's the rape of the common good for the sake of the few and the rich. What could be more interesting than that?

(Other than puppies and Britney Spears's sex life. And maybe the untimely murder of Lil Jakes.)


Anonymous said...

If the tax money used in TIF goes to pay for Italian marble, I hate to think what the money from a Super TIF goes to.

Dan said...

Well done. Reporters don't cover this because they can't explain it as well as you can. Heck, I used to be one of the lawyers getting paid for this, and I couldn't explain it as well.