Counterpoint | Tax increment financing is a tool of purpose, not peril

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I read with no small measure of surprise the commentary “Be alarmed at how cities are using tax increment financing” (Strib Voices, Jan. 2). It urges the public to fear a tool that has long served Minnesota communities, and it does so with sweeping assertions unsupported by fact, context or proportion.

The authors declare that tax increment financing — TIF — has “metastasized into one of the most abused public financing mechanisms in the state.” This is a grave charge — one advanced not with evidence, but with assertion. We are told that because there were 1,678 TIF districts in Minnesota in 2023, the conclusion of abuse must follow. It does not. Numbers alone, unaccompanied by analysis, are not proof of misuse; they are merely arithmetic.

Let us begin with principles. The city of Edina, like every other local government in Minnesota, possesses clear statutory authority to use tax increment financing under state law. That authority is not casual, nor is it unchecked. The TIF Act imposes strict tests that must be met before a district is created, and clear limitations on how TIF revenues may be used. In Edina, we go further still. We have adopted a distinct and disciplined TIF policy. We do not subsidize developers. We use TIF to secure public benefits we want to see in a project — public infrastructure, public spaces and public outcomes that would not otherwise occur.

And we use it sparingly. TIF is a factor in about 10% of the projects approved in Edina and represents about 1.6% of our tax base — hardly an overuse or misuse of TIF (average TIF use in neighboring cities is about 8% of tax base). These are not hidden facts. They are well known to those who have participated in council deliberations over the past several years.

To understand TIF is to understand its essential bargain. A city designates a district and then freezes its tax base. It then invests in improvements (e.g., infrastructure, environmental cleanup, housing, spaces like sidewalks, plazas, outdoor spaces, structured parking and other public realm assets). The future increase in property tax value created by those improvements — the increment — is used to repay that investment. The existing tax base remains untouched. The city assumes no risk. Growth is what actually pays for growth.

The authors point to the former Macy’s Home store site on France Avenue as an example of alleged misuse. The facts tell a different story. The market value of that site is presently approximately $12 million and it generates about $350,000 in annual property tax. We could have had a conventional development at this site but instead, the city sought more — more public benefits, more responsiveness to our Southdale Design Guidelines, and more value from an 8-acre site adjacent to Centennial Lakes. A conventional project might have been in the $100 million range. The result of our work is a proposed project with the estimated market value of $259 million, which will generate annual property taxes in the range of $3.64 million a year. This degree of tax growth would not happen if the site were left “as is,” moderately remodeled or redeveloped as a standard commercial complex.

To call this “corporate welfare,” as the authors do, is not merely incorrect — it is indefensible. This is a redevelopment in the public interest, producing a long-term benefit that far exceeds the patience required during the life of the TIF district.

We are also told by the authors that TIF deprives school districts of revenue. This reflects a fundamental misunderstanding of Minnesota’s school finance system.

For more than 50 years, TIF has operated alongside a state education funding formula designed to equalize per-pupil revenue across districts. The presence or absence of a TIF district has no impact to the tax revenue received by a school district. The Eden/Willson and 50th and France TIF districts in Edina demonstrate that the taxes collected by the Edina School District increased from these parcels after construction was completed. The director of finance for the Edina School District has testified publicly that TIF does not adversely affect the district.

The authors further suggest that TIF developments impose additional burdens on city services without providing the revenues to support them. This is too untrue in the case at hand.

This project does not overburden taxpayers. It does not strain city services. It does not mortgage the future.

Finally, the claim is made that Edina has misused excess TIF funds. This assertion ignores legislative history. In 2021, amid the COVID-19 pandemic, the Minnesota Legislature acted deliberately to provide cities flexibility in the use of TIF funds to stabilize communities during an unprecedented crisis. To recast that lawful flexibility as misuse is to confuse prudence with impropriety.

TIF is not a panacea. Nor is it appropriate in every case. But when used judiciously — within the law, guided by policy and anchored to public benefit — it is a powerful instrument for shaping growth rather than surrendering to it.

We should be wary not of TIF itself, but of arguments that trade in fear rather than fact. The task of local government is not to stand idle while opportunity passes by, nor to denounce every tool capable of shaping the future. It is to act wisely, deliberately and in the long-term interest of the public we serve. That is what we have done in Edina.