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."