Cabarrus Cheap Seats

[Go to NCRC Data Article to Get Projections on the TIF] 

There are days where I feel that local elections are little more than glorified popularity contests and counties would be better managed by having Raliegh hire us a nice manager.  Admittedly, I felt a little more that way before the election of 2004.  However, every now and then an elected offical presents an idea that would not be made by a manager; but by a citizen with vision. 

Beth Snead Feeback’s article in today’s Concord Standard on Bob Carruth’s North Carolina Research Campus (NCRC) proposal demonstrates why it’s worth going through elections every year.  If you take someone who believes enough in what they are doing to go through the election cycle, put in the hours - in spite of having a real job - to serve, and have a vision for the future; and have a electorate with the good sense to elect them - it’s easier to believe that the system works.  If you read Beth Snead Feeback’s Article “Carruth Calls Bonds Risk-Free For County” and pay attention - you’ll find the definition of fiscal discipline and an elected official who isn’t afraid to practice it.

The Setup

To understand the article, it’s first important to understand the mechanics of Tax-Increment Financing (TIF) in North Carolina.  A TIF is a bond that is paid by the taxes that come from the increase in value of a property.  The taxes generated by the base value go to the General Fund, any addtional value is available to pay off the bond.  For a TIF to be issued, a minimum valuation needs to be attached to some of the property within the TIF district - insuring a minimum income stream.  The tax value of the property cannot drop below the minimum valuation until the TIF is paid-off.  This mitigates the risk.

Why is this important?  Well, check this out…

Built-in Restraints

Because the TIF agreement insures a flow of tax money, the County is assured that the tax money rolling into the General Fund.  But what about the increase?  Well, it’s true that it will go to payoff the TIF; but the surplus beyond that would go back into the General Fund. 

That’s where the tempatation could start.  Governments never have enough money.  This was part of the rationale behind John Day opposing the County participating in the TIF.  If the County did not participate with the City of Kannapolis - the project would have to be reconfigured because of lack of proper infrastructure.  The immediate tax revenues from a smaller NCRC that would not reach its full potentional makes putting together the budgets easier and solve some problems from poor leadership in the past that caused school construction to lag.  There is no guarantee that money would go to schools.  It could go to anything, and there would be little restraint on how the County would use the money in the future.  Also, the projections in the NCRC data do not account for surrounding growth from firms not directly affiliated with the NCRC.  These would also pump more revenue into the General Fund to get comingled with all of the other incoming taxes and fees; and subsequently spent.  Carruth’s plan would direct those funds:

“What if we took that new revenue (TIF district tax revenue beyond the minimum valuation), and say the first thing that we do with it as a county, is whatever bond Kannapolis has agreed upon, we’ll cover half of them or give them the revenue from the district - whichever is smaller.”

“If we get more than that, it’s surplus.  If we get less, we give them that amount”

Carruth said all the scenarios point to a surplus because of minimum assessed value agreement.

“The surplus that’s left over, let’s put it in (metaphorical) buckets: give a percentage to schools, a percentage to road improvements, a percentage to public safety and capital needs, a percentage to landmark and open space preservation”

How is that fiscal discpline?  Well, it creates a plan for any windfall from the NCRC project.  By redirecting the funds, by statue, over the life of the loan (25 years) - the County can’t depend of the NCRC to fix any one problem.  It would be very tempting to use the NCRC funds to handle the shortfall in school construction financing - instead of looking at higher impact fees.  It would be tempting to ignore the problems we have, cut taxes, and put off needed improvements five to ten years into the future - like the Cabarrus Taxpayers’ Association (CTA)-backed board did.  Instead, this directs that money to core services and helps take the edge off of future capital needs. 

Smart Money

Another way to think of it, say you’re in a family that lives pretty comfortably at $60K.  The next year, the family is earning $80K.  It’s easier to spend the money than to save it.  However, what if - when you were making $60K - you decided that any additional money would get saved.  It would be too long that you would be in a much better fiscal situation.  This same prinicpal is being proposed for the County government.

Before Bob Carruth was in the majority, the policy of the Board of Commissioners was to roll any excesses into next year’s budget and spend it then.  In 2005, Bob Carruth (with Carolyn Carpenter as Chair) proposed a plan to save any excesses into savings to be used on future capital projects to offset future borrowing.   Back to the family budget analogy - in the CTA household: Budget for $80K,  Make $85K, Spend $85K, Save Nothing.  In one with true fiscal disciple: Budget for $80K, make $85K, Spend $80K, Save $5K.   

The TIF district savings plan takes that one step further.  The 2005 plan saved money on the back end - where this designates savings in the future.  During the 25 years of TIF payoff, the proper infrastructure will be in place, the buildout of the NCRC will not be slowed down (slowing down the project could endanger the potential of Kannapolis becoming a research destination), and capital funds will be provided for projects for the WHOLE county - not just those in the TIF district.  More jobs, less borrowing, and proper infrastructure - government at its best.

Sounds good; but what’s the catch?  We lose the NCRC as a tool to save us from some of our current problems - but that’s not necessarily a bad thing. 

There have been those who have said that all of the County’s NCRC TIF contribution would be better used to fund future school construction.  But if new residental development isn’t covering the costs of the new schools it creates the demand for - is that not a subsidy for the developers?  Does it really make sense to take money from supporting a project and surrounding businesses that provide high-paying, knowledge-based jobs to making sure construction companies stay busy?  Schools should be adequately funded; but impact fees are a better market-based approach than just taxing everyone until someone feels that there are “enough” schools.

Carruth’s proposal shows us that elected officials who apply vision can keep future bureaucrats in check by forcing them to focus on core government functions and not depend on future opportunities to get out of present challenges caused by past mistakes.