Robbing Peter and Paul to pay the DDA
April 07, 2010 - Everywhere I look local governments are facing budget deficits and struggling with decreasing property tax revenues. Officials are desperately trying to figure out where and how to cut expenditures and in some cases, if a tax increase is warranted.
All this got me thinking about the Oxford Downtown Development Authority (DDA) and the way it's funded.
Unlike other government entities that levy their own property taxes – most of which are approved by voters – the DDA's budget is comprised solely of the money it skims from everybody else's millages.
You see the DDA doesn't have a millage of its own. It feeds off other taxes like a tapeworm frolicking in a field of intestines.
Even though it's very dry and boring, allow me to explain. Since 1985, DDA has been funded by what's called Tax Increment Financing (TIF).
Each year the TIF is determined by subtracting the "initial assessed value" – the taxable value of the property within the DDA boundaries when the TIF Plan was established – from the "current assessed value" – the taxable value of the property for each subsequent year.
The amount by which the current assessed value exceeds the initial assessed value (or base value) represents what's called the "captured value," which fuels the annual operating budget for the DDA.
TIF revenues are calculated by multiplying the captured value by the millage rates of the taxing jurisdictions within the DDA district.
For downtown Oxford, this includes the operating millages for the township, village, township parks and recreation department, fire department and local public library, plus the millages to pay the fire and library bond debts.
The school district used to be part of the TIF collection, but it was allowed to opt out in 2000 because of Proposal A. The other entities are unfortunately not allowed to opt out unless the DDA were to expand its boundaries.
I've always had a problem with the way the DDA is funded because, in my opinion, it basically takes money away from other government entities – money voters approved for specific services, not the DDA.
After the first year of a TIF Plan, all revenue increases based on rising taxable values within the district go to the DDA instead of the individual taxing jurisdictions. The amount of money each taxing jurisdiction receives from DDA properties is essentially frozen because it's always based on taxable values from 1985 when the TIF Plan started.
To me, this represents a big loss to those entities.
For instance, because of the TIF capture, $47,807 that should have went to the Oxford Fire Department this year, instead went to the DDA.
As someone who's voted for every single fire millage since I moved here in 2001, it bothers me that this money approved for the safeguarding of lives and property got sucked up by the DDA.
And it's not just the fire department that gets shafted by this skimming. This year the Oxford Township Parks and Recreation Department lost $16,327 to the DDA, while the Oxford Public Library lost $26,738.
I'm quite confident Parks Director Ron Davis and Library Director Bryan Cloutier could have done a lot of good things with that money, but they'll never get the chance because part of the funds voters approved for them went to the DDA – an entity completely insulated from voters.
Thanks to the DDA capture, Oxford Township lost $18,167 for its general fund this year, while the village lost $193,524 from its operating tax for the 2009-10 fiscal year.
Then again, the village charges the DDA $85,000 for DPW services and $60,000 for police services, so it recoups the majority of its tax money.
Funny how that works out.
If there was no DDA, there would still be a downtown and the DPW and police would still be required to maintain and serve that area. But because there is a DDA, the village has a vehicle through which it can get most of its money back. Seems like a big shell game, doesn't it?
Now, there is a pro-TIF argument that says the increased tax revenue in a DDA district should be captured by the DDA because without its actions and improvements that extra money wouldn't be there in the first place. In other words, there's a direct link between what the DDA does and increased property values in a downtown area.
That's probably true in downtowns like Rochester and Royal Oak.
But in Oxford, I tend to think the increased tax revenues (back when times were good) derived from downtown properties had more to do with the highly-traveled M-24 corridor; the fact that the township's residential areas were once growing by leaps and bounds; and the private real estate investors and business owners who saw the potential for profit because of those two things.
Based on what I've seen over the last 11 years, other than the parking lot improvements and the grants it's given some businesses for new facades, signs and awnings, most of what's happened downtown is not the result of DDA actions; it's the result of market forces, the entrepreneurial spirit and individuals willing to take risks.
Anyway, the point I'm trying to make here is that I'd rather see the money the DDA siphons off everyone actually go to those entities as the voters intended.
That, in my mind, is preferable to service cuts and tax increases, which the extra money could somewhat lessen.
CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.