The city of Houston is being carved into special taxing districts, promising windfalls for some, financial burdens for others

Craig argues that "specialized tax breaks" like TIRZs don't work and, in fact, the Brown administration's liberal use of them at a time when the local economy is booming may hurt the city in the long run.

"The more special things you do for developers, the more you inhibit development, because it's all the other people you have to worry about," Craig says. "Every time you give one person a tax break, you've just squashed five other people because you've raised their tax burden."

Craig says a more effective incentive would be to take advantage of the good times and cut property taxes. "That's one way government saves for a rainy day, so that, if it has to, it can raise taxes later to pay for the stuff that's needed. With the way property values are increasing, I keep waiting for Brown to talk about tax cuts."

More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.
More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.
More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.
Phillippe Diederich
More than 1,200 residents gathered July 20 to protest the proposed TIRZ in the Memorial City area. City Council approved the zone the next day.

To the contrary, in June, during the city's annual budget process, Brown rejected the call by several councilmembers to cut anywhere from two to seven cents off the city's ad valorem rate of roughly 66 cents per $100 in property valuation. Harris County commissioners have also expressed a desire to cut the county's tax rate, even while they are preparing to ask voters to approve more than $500 million in bond issues this November to fund an expansion of the Port of Houston and construction of the $119 million Civil Justice Center.

If passed, the new debt would end up costing the county an additional $20 million to $30 million a year. Such fiscal pressures might explain county officials' growing annoyance with the city's TIRZ policy.

"Just from a philosophical perspective, there is a limit to what we can do at the county," says Harris County Judge Robert Eckels. "We spend money on the justice system, on social services and health care, children's protective services. The issue becomes, are we going to take money away from our budget to subsidize development?"

Particularly when that development does little to ease the county's burdens. State law on tax-increment reinvestment restricts expenditures to certain public improvements, such as roads and utilities, that are normally funded by the city's capital improvements budget.

"It's a great deal for the city," says county commissioner Radack, who wants to know what the Texas attorney general has to say about it. "It's a great deal if they can convince us to go along, because that's just one less penny they have to spend on their responsibilities.

"I'm sure they laugh every time they see the county spend money on a TIRZ."

Surprisingly, tax-increment reinvestment was not a particularly favored form of subsidy during the administration of former mayor Bob Lanier. Lanier, who was famous for using everything from the Metro sales tax to restructured bond debt to free up cash to meet the city's needs, had a philosophical opposition to tax-increment financing, suggesting that it could "balkanize" the city into rich and poor areas.

During his second term, however, Lanier launched his Neighborhoods to Standards program and dedicated his administration to the revitalization of downtown and the Inner Loop. At that point, he, like other urban politicians before him, found tax-increment reinvestment to be quite useful.

Lanier's first TIRZ (and the city's second) was created in Midtown and is considered by many to be a classic use of tax-increment reinvestment. The conditions certainly demanded something: acres of vacant land, whole blocks of substandard buildings, a crumbling and obsolete infrastructure. The Lanier administration also created a TIRZ in the Market Square area to spur development around the Rice Hotel, whose purchase and redevelopment were also to be funded with public subsidy.

By the time he left office at the end of 1997, Lanier had warmed considerably to tax-increment reinvestment and had spread a range of TIRZ projects, from single-family housing construction to new schools, throughout the city. While Lanier's strategy had its critics, nary a peep of complaint about the city's use of tax-increment reinvestment came from councilmembers or the county commissioners.

That's because everyone supported Lanier's goal of bringing residents back to inner-city neighborhoods by enticing developers to build inner-city housing. That hadn't happened in many years, chiefly because suburban home builders have their streets and utilities paid for through municipal-utility districts, which issue bonds to support the development of raw, unincorporated land.

"Lanier was absolutely dead focused on getting the city of Houston on the same foothold as those areas outside the city limits," says Michael Stevens, who, as Lanier's special assistant for housing and inner-city revitalization, controlled the city's economic development subsidies. "The tough part of all this — and Lanier and I had to deal with it a lot — is how much should someone get. Because, as someone who's been in the development business, I know that if I get this amount of money, I'd be happy. But if I got more than that, I'd be ripping off the public."

Brown succeeded Lanier in January 1998, promising to implement something called Neighborhood-Oriented Government to encourage citizen participation in community redevelopment projects. But if tax-increment reinvestment is Brown's idea of neighborhood-oriented government, or NOG, as it's known, someone forgot to tell the neighbors. Residents who live adjacent to two zones, in particular City Park and the recently approved Memorial City TIRZ, say Brown has ignored their concerns and instead of NOG is advocating DOG, or developer-oriented government.

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