Lollipops and Roses

In a great example of the “having your cake and eating it, too” school of development, developers for the Plaza sight in Eastern New Orleans are pushing the boundaries of the “public option”, otherwise known as TIF in a bid to have the city not only pre-pay for the cake, but pay off the mortgage for the bakery all for the privilege of letting the citizens buying a slice, that is, if the cake even gets made.

On Thursday, the New Orleans City Council is expected to consider a proposal to use future tax revenue to help transform the site of the defunct Lake Forest Plaza mall into a modern shopping center called the New Orleans East Marketplace. TP

At least four of the seven council members have endorsed the proposal in principle, but the president of a government watchdog organization says the deal amounts to little more than a public bailout for the developers.

The very libertarian Reason Online has an article on a Cabela’s deal in Texas that points out some of the down side to the TIF model, quoting Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation.

The rest of us pay taxes for normal services like public safety, building inspections, and street maintenance, and those services come out of the general fund. And as the cost of services goes up, and the money from the general fund is given to these businesses through a TIF, the tax burden gets shifted to the regular slobs who don't have the same political clout. It's a crummy way to treat your taxpaying, law-abiding citizens.

Of course, shifting the tax burden to regular slobs is pretty much are the taxation and development models of the last couple of decades.

Pro- oligarchy business Republican love them, because someone with very deep pockets won’t be paying taxes anymore, and they can tout the “economic” development the schemes deliver. To be fair Pro- oligarchy business Democrats love them just as much, as the can tout all the “benefits” the people will enjoy paying for items “many times over” with both their taxes and take home pay.

The libertarian wing of the Republican party, once would have put the breaks on such schemes, but it now resembles the back room where Flounder and Pinto are directed in the rush sequence in Animal House where we find Jugdish, Mohammet and Lonny sequestered from the “real” party.

"The mall will serve as an anchor to the revitalization of New Orleans, " said Burgos, a prominent supporter of Mayor Ray Nagin. Burgos plans to redevelop the now mostly empty site through his company, New Orleans East Design LLC. "It's an investment that will pay for itself many times over."

But this is a lot worse than your everyday average TIF scheme. Good ol’ C Ray is caught up in this and you know what that means….

Under an agreement that Mayor Ray Nagin struck with the company in May, Lake Forest would put $1.6 million in escrow, to be released to the city when the TIF is created -- essentially compelling the city to approve the TIF if it wants to get paid -- and the $1.4 million would be forgiven as the developers make progress.

Not only has he strapped the city over a barrel on the financing, he’s worked a clause in to potentially leave the city holding the ball should the project fail.

And there are no provisions for what happens if the project fails, save for a clause that if construction hasn't started in 36 months, the city and developers will "negotiate in good faith" to "successfully develop" the project.

So what’s on the table? Not much. As the article points out, the “big box” tenants being dangled like rotten carrots (and they’re likely to want tax-free deals of their own) are not on board yet, but somehow…

Burgos and Ryan plan to release a study touting their project's potentially powerful economic impact.

So what are the odds, the study will be all Lollipops and Roses? But something tells me that a developer with essentially no risk to themselves, and a built in public bailout procedure is not going to make very prudent decisions.

Heads I win, tails you lose. Lollipops and Roses for sure, just not for us regular slobs.