When it comes to steering economic development, the city doesn’t have many tools at its disposal. The most important one, Tax Increment Financing is a finite resource that should be used wisely.

That’s why city staff and the council’s Community Development Committee are on the right track with their overhaul of TIF policy now under consideration.

The current situation served neither city taxpayers nor most of the business community very well. Developers go before the city on a case-by-case basis, and make the same pitch: Give us a tax break or this project won’t happen.

It’s a game of chicken that has put the city in some awkward positions, such as subsidizing the move of the Pierce Atwood law firm from a downtown office building to a renovated industrial space on the waterfront. Would the law firm have really left Portland if it hadn’t received a tax break? We’ll never know.

Now it seems every large development makes its pitch for a tax break, and the city is making its decisions piecemeal, not as part of a coordinated plan. This is not a good way to build for the future and it is not fair to existing businesses that have to face off against tax-advantaged competitors.

The proposed plan is still a rough draft and has elements that we like, and others that raise concerns. We hope as the plan moves through the political process it will be improved.

On the positive side, the proposed TIF ordinance would identify neighborhoods where tax breaks would be offered to finance necessary infrastructure. Individual tax breaks would be limited, both in percentage of the total project cost and the length of the time taxes would be returned. By focusing tax breaks in certain neighborhoods, the cumulative impact of subsidized infrastructure will have a public benefit that goes beyond individual projects, helping even the businesses that do not have tax breaks.

On the negative side, the plan as written leaves gaping holes for exceptions. Opening the door for projects that have “extraordinary public benefit” puts the city in exactly the same position it sits now: Every project can claim that it is extraordinary and it will again be up to the City Council to play chicken with every developer.

The city is off to a good start, but still has a long way to go before it has a fair and predictable TIF policy.

 

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