STATE QUESTION NO. 707
This measure amends Section 6C of Article 10 of the Oklahoma Constitution. The amendment deals with the use of certain city, town and county taxes and fees. When authorized by law, cities, towns or counties can put these taxes and fees to use in three ways. The first use is specific public investments. The second use is aid in development financing. The third use is an income source for other public bodies in the area. The Legislature can authorize cities, towns and counties to direct the apportionment of these fees and taxes among or between these uses. The amendment allows these apportionments to be prospective. The amendment permits these apportionments to continue from year to year. The amendment permits cities, towns and counties to pledge certain taxes and fees beyond the current fiscal year and to pledge certain taxes and fees to repay some debts of other public entities.
SHALL THE PROPOSAL BE APPROVED?
But who can tell by reading the ballot language?
This is a big step in dismantling the state’s Constitutional protection from politicians passing long term business risks upon Oklahoma taxpayers. It all has to do with Tax Increment Financing or TIFs. Simply put, TIFs finance capital projects from the stream of projected revenue generated by the projects. They are needed in situations where bond writers feel there is too much risk for normal financing methods.
Supporters of this constitutional amendment will tell you there will be no increase in taxes with this proposal. Yet the whole reason for the amendment is to place all the financial liability on taxpayers.
Tax increment financing is obtained through a general obligation bond. This means that, should the project fail to generate sufficient revenue, the city is liable to pay any shortfall from its general revenue. In other words, the city is accepting a risk on the project.
To be fair, let’s listen to a proponent of SQ 707.
Wes Stucky, Ardmore Development Authority/Chamber of Commerce said, “Anyone who owns a home has to go through an extensive paperwork process to apply for a home loan. Once they get approved for a home loan they still have mountains of paperwork to sign. Imagine if they had to do that each and every year of their home loan. That would drive most homeowners crazy. That is our point in urging passage of this bill. Recipients of TIFs have to re-apply each year for their loans. It’s a messy bureaucracy and we want to streamline to process by only having businesses apply once and only once for this great economic development tool.”
One big difference here. Businesses can already get financing like homeowners and avoid annual paperwork if they want to assume the same risk as homeowners. Now if the city offered to finance homeowners with TIFs, so that their mortgage payments were taken from future taxes based on the appreciated property value, most homeowners would be more than happy to fill out papers every year. Especially with the condition that if assessed values don’t rise enough to make the payments, their neighbors would pick up the tab.
Currently, the state Constitution already allows these TIF liabilities for taxpayers, but only for the current fiscal year. The State Supreme Court has ruled that entering long term indebtedness for such reasons violates Article 10, which is there to prevent such wheeling and dealing by politicians influenced by business interests.
TIF supporters will say that Oklahoma should be run more like a business and be willing to take risks with taxpayers money. Businesses take risks because they want to make a profit. Businesses also incorporate to avoid personal risks if they fail. TIFs simply take the risks from bond holders and transfer it to taxpayers. I don’t trust politicians to saddle me with risks as it is now, let alone for periods in excess of one year.