09/11/85 - Laserfiche WebLink

Home

-11- I scme, if not all, of the growth would have oocurred anyway, very likely el. sewhere in the same urban ar~a and p~ssibly in the same aunty, school district ~r city. Defenders usually don'.t disagree that development would haw occurred so~where. They point out that assistanoe still can be justified if, for example, the beneficiary is a built-up city needing to undergo rede~lcpment. Resistar~e to reduci taxes ~o reauc~ng property zaxes ma~ result.--Scme types of assistance appear to oonflict with the state'.s interest in ]~lding dc~n property taxes. ~-c..~)ters of certain prc~)erty-tax-related assistance may resist state programs to reduce property taxes, not c~ the merits, but out ~f fear that such zeductior~ also would reduoe the amount of subsidy they can provide. Urger the provisions of o~e popular mechanism, tax-increment finar~irg, the amount of real estate assistance ~aries directly with the size of the tax rate. If property taxes rise, so do the dollars available fc~ real estate assistar~e. A possibility exists that city governments might be t~pted to lobby against property tax changes out of fear fc~ what such ci%arges would do to their revenue stream f~r real estate ass istar~e, irrespective of whether broader public policy might call fc~ reduced property taxes. For example, lobbyists for city governmer~s already have urged that the Legislature protect dollars fc~ real estate assistar~e in any prgperty tax reform. i I I I I I I I Serious problems cauld result if property ~-~lues were to declir~.--Property values in urban areas could decline. Few are predicting such a charge, but few predicted in the 1970s that farm values would drop, either. ~he result of a major decline in values could be devastatin~ for tax-increment financing, which depends on an increase in valuation to su(~eed. If property values declined, other property taxpayers in a ocmm~unity would be required to make up the shortfall in tax-incz~ment districts. It is possible that ___~_ _rcial-industrial ard rental residential ~-alues cculd fall in 1986-88, which is fi~ to se~en years f~ollowirg the passage Of a federal law in 1981 which provided for accelerated depreciation of buildings. ~hat act increased the demar~ for investment opportunities in these J~uildings. Properties ust~lly provide maxi~Jm yield to an investor if sold in about fi~ to se~en years. Gonsequently, a greatly increased s~ply cf properties my be offered fc~ sale beginning in 1986, as in~stc~s begin selling the properties they aaquired urger the provis~ of accelerated depreciation. A glut in the market would foroe market values dawn. In addition to these factors a general ':scft~irg': of the overall residential m~_rket, including ~stead, already may be occurring. A signifiaant drop in market values wauld threaten the stab~&ity of tax-imcrement districts, which deper~l upon property values ~t decllnir~ to keep their revenue stream steady. A provision already in state law anticipates that a drop in property values could oocur. It al~o~s a city gov~nt to keep valuation in a tax-increment district at an initially-established level, even if prevailing property levels drop in the city. The provision enables a city to require that the developer/owner during the oc~tract period will r~t Qh,~11enge the valuation of property in t]~ area reoeiving assistance.