Monday, August 24, 2009

Harris jail building scheme an improper use of tax-increment financing

Voters rejected a new jail last year, but the Harris County Commissioners Court wants to shove one down their throat, anyway, reports the Houston Chronicle ("Deal on jail, stadium, Dome in homestretch," Aug. 24), using a tax-increment financing scheme:

The city of Houston and Harris County are negotiating a deal that could pave the way for construction of a new soccer stadium, a new jail and the redevelopment of the Astrodome, according to officials taking part in the talks.

The negotiations, which have been under way for several months and are reaching their final stage, focus on the use of tax increment reinvestment zones, or TIRZ, as vehicles for the major capital projects.

“We're in the home stretch,” said David Turkel, director of the county's community services department, who has played a key role in the talks. “I hope that we could get all of this done as one package before the end of the year, within the current administrations.”

Turkel said the concept is ideal for the county because it allows major expenditures on capital projects without using general funds or necessitating a tax increase to pay for the debt such projects would require. It also allows the county to sell bonds without voter approval.

The city's motivation in the discussions is to win two concessions: county participation in a TIRZ established to build a stadium for the Dynamo, Houston's Major League Soccer team, as well as a new detention facility that would be operated by the county and replace the city's two jails, which a court-appointed inspector recently said must be replaced soon because of poor conditions. A bond referendum to fund a similar facility that would have been run by Harris County was defeated by voters last year.

This seems like a pretty blatant misuse of the TIRZ statute, which was created to encourage private economic development, not to override the will of the voters in bond elections.

Indeed, it's hard to see how Harris County can justify using a TIRZ to build a jail. By law, the county must certify that projects built "will significantly enhance the value of all the taxable real property in the zone," but a jail won't increase property values. The only businesses lining up to move next door will be bail bondsmen and loan sharks. And if property values don't actually rise in the TIRZ, then city and county taxpayers must pick up the tab.

The soccer stadium and Dome revamp, though speculative, could increase property values. (As an aside, why are they pushing soccer? Why not build an arena for a sport that actually has fans in Houston, like boxing, mixed-martial arts and combat sports? Professional soccer in general has been an economic loser.) But jail building was never the purpose of tax-increment financing and is an inappropriate way to use that mechanism. I don't see how they could honestly make a finding in good faith that a jail would "significantly enhance" property values.

A TIRZ works by creating a special district with boundaries, then freezing tax revenue to the city, county, and school district within that area, using future "increment" increases in property values to make payment on development bonds. The mechanism assumes property values will go up, but that's not a good assumption when A) the housing market is experiencing a major bust and B) a new jail will cause property values around it to stagnate or decline, not increase. If values decline, there's no money to pay the bonds and taxpayers must pick up the tab.

I'm not a great fan of tax increment districts; I've both seen them work well when developments succeeded and watched the idea fail when developers go bust. At this stage in the process, the math depends entirely on how they draw the zone map and their projections of likely property value increases. But there's simply no way the plan works if property values in the district don't increase, and jail building will likely have the opposite effect on the tax base.

If Harris County needs a jail they should return to the voters and make their case, not sidestep voters' wishes with a shady, backroom deal that pretends jail building is "economic development."


Rage Judicata said...

Sure would bnice of some of those Tea Baggers would get outraged about a direct assault on the will of the people and taxes.

Anonymous said...


I completely understand your point of view on this article. On a much lighter note, you should ponder attending a Houston Dynamo game before concluding that soccer has no fans in Houston.

Gritsforbreakfast said...

According to these data, Dynamo attendance declined from last year and it looks like they're only filling up about halfway the U of H stadium. So I do think it's questionable whether soccer has enough fans in Houston to support a new facility or justify tax-increment financing.

That said, at least a soccer stadium has the imprimatur of economic development. Not so, the jail.

Anonymous said...

Locking up criminals doesn't positively impact property values? Since when?

Anonymous said...

What you're missing here is that the Houston City jail facilities, which, if I'm reading this right are the subject of the funding, are without a doubt the worst damn hellholes in the city. As someone who spent some time in the jail in my yoof as a "guest" 15 years ago and the occasional visits with my clients later, I can tell you that there are plenty of good reasons to build a better facility unless you subscribe to the notion that the next sequel to Escape From New York oughta be set in the Houston City Jail.


Gritsforbreakfast said...

3:08, locking up criminals may (or in the case of low-risk, pretrial defendants, may not) improve property values, but the effects are not confined to the taxing district and property values will decline in the area AROUND the new jail.

Sugarbear, I don't oppose the city improving their inadequate facilities; that's a separate question. But a TIRZ for that purpose is unwise and unwarranted .

Anonymous said...

TIF and TIRZ deals simply divert revenue that would have gone to general fund. Taxpayers, and in Harris County, homeowners in particular should be screaming bloody murder. The fiction is 'that these projects can't get done without the TIRZ'. Nonsense, if there's a need and a benefit things get done. City elections are near, the county critters are up next any and all who aren't term limited out this time.

Anonymous said...

They need a place to put more jail inmates. They don't know what to do with the ASTRODOME.

Not sure where the soccer stadium fits in. Maybe ICE needs a place to put more aliens.