This coming Tuesday, City Council will vote upon changes to two tax increment reinvestment zones: TIRZ 6 and TIRZ 13. There are seven agenda items listed under item 25 regarding the changes. If you want to learn about the criteria for establishing a TIRZ in the first place, see Section 311.005 of the Tax Code.
TIRZ 6, which is located in the area of the Spaghetti Bowl and includes the new medical campus, will be expanded to 595 acres. It will come with forgiveness of 50% of City property tax for the next 22 years. Moreover, much of the TIRZ stands in a federal “Opportunity Zone” and so there will also be total forgiveness of any federal capital gain tax for investors who hold property there for at least 10 years. The plan is intended to spark private investment around the ever-expanding medical campus. I have my doubts as to whether these incentives are necessary or wise, but I need to learn more about this issue before forming an opinion.
But then there is TIRZ 13, which is located in the open desert in northeast El Paso. The question of why a TIRZ should be established in open space at all is an important one, but in this case there are even more serious questions. The TIRZ includes the 2,313 acres of public land that Paul Foster is swapping with the City for his 44 acres of land in northwest El Paso, now earmarked for the Great Wolf Trough (Lodge). Whereas previously, investors in TIRZ 13 enjoyed a 25% break on real property tax increment, Tuesday’s vote will decide whether to increase that to 75% within TIRZ 13 for the next 50 years, until the year 2070! Granted, the investors will be required to provide much of the infrastructure within the area, but the tax break is so extreme that the City’s general fund will ultimately be deprived of tens of millions of dollars over the life of the TIRZ, and possible hundreds of millions!
The argument that the land would not otherwise be developed rings hollow. In America, investors will risk their capital on real estate projects if they are profitable and there is a market for them. It is certainly not the place of government to step in and provide corporate welfare to real estate investors.
Projects like TIRZ 13 are why homeowners bear so much of the property tax burden in El Paso and are already suffering from the second highest property tax rate in America among the 50 largest cities. Last I checked, I do not get a break on my homestead property tax in spite of all the improvements I have made to my property since I acquired it ten years ago. Where’s my TIRZ? The future tax revenue that will not be collected from TIRZ 13 investors will translate into a higher tax burden for homeowners. That is a fact.
Finally, we should be asking ourselves where the thousands of residents of the future TIRZ 13 development are going to come from. According to the latest federal census data, the population of El Paso has declined for the first time since the Great Depression, and the primary reason–and I do not think I am wrong–is the crushing property tax burden imposed upon us by City Council. It is obvious that the TIRZ zones on the edge of our City will catalyze the depopulation of our City center in favor of endless sprawl, longer commutes, and additional infrastructure expenditures. This cannot be a good thing.
The bottom line is this: Developers should pay for their own developments and assume all the risk and pay all their property tax, just like I purchased my own home, assumed all the risk, and pay all my property tax. That is the American way.
Rich Wright wrote about TIRZ 13 in a recent blog post, and he is absolutely correct.
I will post this email on my new Facebook page, El Paso Porkfest, where El Pasoans can exercise their First Amendment right to criticize our government.