Media Clips

An incentive can only be considered effective if it persuades its target to take action or make a choice.

A largemouth bass, for example, will look at a split-tail spin beetle and decide whether its alluring chartreuse equals a tasty snack. If he gambles, he loses.

But if the spin beetle is so unconvincing or unappealing that the bass decides to skip a meal, the lure is a loser.

Such is the case with the tax increment financing for economic development in Louisiana. TIF districts are created to divert a portion of taxes to pay for the bonds that finance construction projects. Such district are helpful for governments lacking the upfront cash to spur large-scale development.

In Louisiana, the state constitution allows sales and property taxes to be used to create a TIF district. Forty-seven other states that use TIFs restrict them to property taxes.

In New Orleans, developers have preferred sales tax TIFs because only 16 of the city’s 175 property-tax mills are not dedicated to specific boards or agencies.

But even with the sales tax option available, there are only two working TIF projects in the city: the River Garden development on the old St. Thomas housing site and the Algiers Development District. Both have Wal-Mart Supercenters as their tax providers.

In eastern New Orleans, developer Ashton Ryan is asking for a TIF district to help pay for the redevelopment of Lake Forest Plaza. A Lowe’s Home Improvement is already open on the former mall site, generating the sales taxes that would help secure bond money.

Although commerce is needed in the Lake Forest area, the inherent problem with sales tax TIFs is that New Orleans will reach a saturation point with enough Wal-Marts, Lowe’s stores and other retailers. And in some instances, residents just don’t want them to open.

With its smaller post-Katrina population, the city is not a proven retail hub. The majority of department stores and grocers have gone back into areas where they or a competitor were before the storm. Market demand, rather than a developer’s vision, will ultimately determine who opens and where.

Mid-City residents are very vocal in their opposition to the big-box stores in the proposed Victory development, which the recession has sidetracked.

Victory’s status highlights another weakness with the sales tax-based TIF. During a down economy, shoppers may not provide the money needed to keep a project moving forward.

With the uncertainty of the sales taxes as a development vehicle, New Orleans needs to examine how its property taxes are being used.

More than 90 percent of property taxes are declared untouchable. The biggest chunks go to the Sewerage and Water Board, 52.9 mills, and servicing city debt, 31.7 mills.

The police and fire departments also have dedicated shares, along with Public Works, the Orleans Levee District and the Audubon Zoo and Aquarium. Portions also go to funds for capital improvement and infrastructure, neighborhood housing and economic development.

On the surface, those all appear worthwhile uses of tax money, but are the specific allocations the best use of public resources?

Could some of the money be put to better use if it were available for TIF districts?

To create more interest in the incentive, the City Council is evaluating its TIF policy. In doing so, it should free more property tax money for TIF projects.

Failing to do so is just dangling too little beetle in front of the bass.