Rolling the Dice on the Taxpayers' Dime

By Geoffrey Lawrence
  • Thursday, January 29, 2009

Executive Summary

Over the past three decades, local governments in Nevada have recognized that extensive use of onerous zoning and other restrictions have had the unintended consequence of discouraging private developers from investing in downtown areas. To overcome these government-imposed obstacles, local governments have established redevelopment agencies with the charge of revitalizing urban areas. Redevelopment agencies attempt to lure private investment back into city centers by offering taxpayer-funded incentives through a method known as tax-increment financing.

Tax-increment financing systematically channels tax dollars away from school districts, police departments and fire departments, for example, and into redevelopment agencies. Redevelopment agencies use those tax dollars to make payments on bonds that have been issued in order to construct elaborate public facilities or to provide financial incentives for private developers to invest in city centers.

This approach has incurred a new and potentially worse set of unintended consequences. It exposes taxpayers within redevelopment zones, who are often low-income families, to burdensome amounts of debt in order to subsidize large-scale developers. It further creates opportunities for corruption by making public officials responsible for taxpayer funds that are explicitly designated for disbursement to private developers. Moreover, redevelopment agencies in Nevada are designed to endow local officials with powers that are not legally vested in them by the voting public and can insulate the actions of local officials from public scrutiny.

These impacts are particularly egregious given the fact that they are completely unnecessary for the purpose of encouraging investment in city centers. City officials in Anaheim, Calif., have recently demonstrated that redevelopment can be accomplished much more effectively and without adverse consequences simply by easing the barriers which have impeded development in the first place.

State lawmakers owe it to their tax-paying constituents to review the laws governing redevelopment in Nevada and determine where Anaheim-style reforms can be made.

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