Our friends on City Council today gave away another million dollars. From KVIA:
Construction on a new $16 million development project in northwest El Paso is set to begin this summer.
. . .
At Tuesday’s city council meeting, representatives voted to approve an incentive package of $1,314,414 for the project. It includes a $557,000 rebate on property taxes and a $717,000 sales tax rebate.
Makes you wonder how anything ever got built here in El Paso without tax rebates.
Of course this development will provide dozens, possibly hundreds, of well-paying service sector jobs, from teenagers scooping ice cream and frying potatoes in the food court to young adults hawking shoes and electronics in one of the retail outlets.
I suppose this was our outgoing City Representatives’ last chance to do something for their benefactors before they ease back into the private sector.
Remember how all the amenities are supposed to attract businesses to flip the burden of property taxes from homeowners to commercial property owners? I have to wonder how holding those opposing ideas doesn’t fuse some neural circuits in our city “leader’s” brains. But I guess that would only happen if they actually believed what they said.
In the words of Martin Luther King, Jr., “This country has socialism for the rich, rugged individualism for the poor.”
Or, as we say in El Paso, “This city has tax rebates for the rich, and taxes for the poor.”
Which department/entity is involved with the Northgate development, if that is the project you are referring to
As has been said in the past, this is a double loss. The business doesn’t pay the tax and the burden to make up for that loss is put on the property owners. This means we’re paying our own share AND their share. If someone wants to start a business here badly enough, they shouldn’t need to ask for abatements. They do this because they know a sucker when they see one. The other point to make on this is the idea that, once again, it favors the West Side. When will the city start paying attention to the Northeast for a change? As Sam Morgan has pointed out, the Northeast is the red-headed stepchild of El Paso.
One of the Northeast’s biggest problems has been Rep Robinson. He seems like a nice enough guy but he has spent 8 years not really doing much for the northeast. It’s unfortunate but if you combine the transient nature of a lot of the military folks who live in the northeast with a Rep that’s not really involved in figuring out what needs to be done and you end up with the current situation.
I think folks will be impressed with the change they see with either one of the candidates who made it into the runoff. It will still be necessary to make an effort to reach out to the residents to see what matters to them and what needs to be prioritized but from what I’ve seen there isn’t really any animosity towards the northeast. It’s been entirely a matter of Robinson not being engaged enough to request projects during calls for projects and residents feeling like no one is really listening to them (again because Robinson isn’t as engaged as the other reps).
I really don’t understand why folks are so upset about the tax incentives.
Based on what I’ve read it sounds like you have a property that’s worth $100. You pay $5 in taxes based on it’s worth. You cut a deal with the city to make a major improvement to the property so that now it will be worth $1000. Instead of having to pay $50 in taxes the City cuts you a deal where they give back $22.50 and you end up paying $27.50 in taxes on the property ($5 from the original value and half of the $45 in new taxes). So… $27.50 is quite a bit more than $5 and after x years it jumps up to $50.
No it’s not a perfect system but it’s available to anyone who wants to take on a project of that sort, but it does NOT hurt us or the tax revenues. At the very worst they would be paying exactly the same amount they are paying now. Why is it so bad that the City lets businesses pay a bit less in taxes in exchange for improving their properties and therefore owing more in taxes (and even more in the long run)?
Same thing with sales tax rebates, a new store opens up and instead of paying their $1000 in sales tax for the year they pay $500 but if nothing was built there we would be getting $0 in sales tax. Yeah we don’t get the full $1000 (right away) but we do get $500 and the opportunity to collect more down the road so again, why is that a bad thing?
It really just feels like people are jealous that someone gets a nice deal worth $1M+ over multiple years and they just don’t like it because they don’t have something similar. In this case (with it being 50%), the City is actually getting the same amount (or more) in new revenues because of these projects. If anything the article could also read “City agrees to collect $1.3M in new taxes for this development”
See The City’s War on Small Business.
Every time the City gives a tax incentive, they’re asking the rest of the taxpayers to pick up the slack. And for what, exactly?
“We lose a little bit on every sale, but we make it up in volume.”
How though? They are collecting more in taxes from the improvements than they were before the improvements.
Mr. Valenzuela clearly has a vested interest in not seeing too many new entertainment venues opening up. I would think that would be especially true of ones like Top Golf which could lure customers away to a different shopping area. I wonder if the folks at Independent Burger would feel the same way about Top Golf (or Alamo Drafthouse) being walking distance from their stores.
I just don’t understand how collecting an additional 50% or even 25% in additional taxes on the increased value is a horrible negative. That’s why I say it sounds like jealousy. In Hoppy Monk’s case he seems to be upset that Top Golf gets to keep the sales tax while he doesn’t. Sure giving 100% rebates isn’t ideal for every situation, but how is 0% of $1M worse than 100% of $0 if nothing gets built?
Along those lines considering the most recent situation how is 50% of $1,000 worse than 100% of $0? If your concern is the bottom line then the option that gives you the most revenue from taxes would seem to be something to seriously consider. I’m guessing that folks don’t believe that businesses wouldn’t open up shop in El Paso without those tax incentives and that’s fair, but anecdotally (as a lifelong resident) I have noticed an increase in businesses setting up shop in El Paso since the City started pushing out more tax incentives.
Also keep in mind that we already let plenty of the big dogs completely skip out on paying any taxes to the City because we allow them to exploit the doughnut holes at the edge of the City limits. You have River Oaks and other major players intentionally keeping their undeveloped properties un-annexed because then they don’t need to pay City taxes at all. If you look at a map of El Paso and zoom in on the edges you see quite a few properties that are technically in the County even though they might be 100% surrounded by the City of El Paso. They get the roads, the infrastructure, police, and fire and they don’t need to contribute anything because we let them do that.
Or look at the appraisal system that makes it relatively easy for businesses to fight their appraised values (like Western Refining did a few years back) and relatively hard for the average home owner to fight as easily. I would argue that this is one of the major reasons why residential properties end up paying a disproportionate amount of taxes, it’s just hard for them to go and fight an unfair appraisal.
The simple fact of the matter is that taxes are never entirely “fair” but the tax incentives can be sought out by anyone. I’ve seen council approve some relatively small incentive packages (or other accommodations) that benefit specific properties just because the owners asked. A common one is parking reductions, where you don’t have enough land to build what you want to build so here you go we will give you a parking reduction so you can build it with insufficient parking.
One nice thing about some of the tax incentive deals that I’ve seen at council is that the businesses agree to accept certain appraised values and after 5-10 years they have to start paying taxes on those values. They agree not to fight the values of their properties in exchange for getting some money back up front. One thing the city has done badly (IMO) is that they have never followed up on these tax incentives as they expire. I would think that they could make a stronger case for why they are a good thing if they could give us #s showing the extra tax revenue that’s collected over the life of a project. Similarly I would think that a perpetual source of added revenue would be much more valuable than $50k in permit fees to let someone improve their property and therefore owe the City more in taxes.
Will more retail options create more money spent on retail? Or are we just re-slicing the pie?
Do we need more retail? Probably not, if we have to grease the skids. If we really needed more retail, why would the taxpayers have to incentivize it?
Do you think that guy was going to take his upscale marketplace to Canutillo?
Isn’t city government queering the deal? Distorting the market? Picking winners and losers?
We’ve got this little deal we aspire to in the United States. It’s called capitalism. Occasionally there are externalities that government needs to address, but generally the less we let government interfere, the better.
Maybe you’re having a hard time seeing the big picture.
I’m not having trouble seeing the big picture. I’m having trouble understanding the nonsensical argument that “we are giving money away” because we aren’t actually getting less money than we were, we’re just getting less money than we could. I mean that’s the general argument that is put out there most of the time and from an economics standpoint that’s not true. What you said above is much more nuanced and that’s a different conversation.
Basic economics seems to indicate that if you reduce the barriers to entry then you can encourage more businesses to take a shot at setting up shop in El Paso. I find it interesting that you don’t think we need more retail since Hoppy Monk and at least a couple of dozen other places come to mind as relatively new businesses. Plenty of them have gotten variances for things like parking, accessibility, and a slew of other things. According to your argument it sounds like we shouldn’t cut anyone any breaks (no “greasing the skids” as it were) and it should be up to everyone to make it on their own. So if Hoppy Monk, Dead Beach, or Independent were short a few parking spaces they shouldn’t have been allowed to open because the rules say they need n parking spaces. Just like the rules say you need to pay $x in taxes because your property is appraised at a certain amount.
Oh wait but parking reductions are in the code as an option? Well so are the tax incentive deals. Any business can go after those tax incentives and the City has people assigned to actually work with them to try and help them make it happen. I’m not necessarily saying that the tax incentives are good or bad economic motivators in the long run but they’re a known quantity. Any hotel or restaurant etc. can pursue them or other options and if they meet the requirements set forth then they can get their skids greased.
In Top Golf’s case I seem to recall that they walked that statement back and ultimately said that they did need those incentives. I can see reasons why they could be lying when they said they didn’t need them or when they said they did need them so it seems like something of a moot point. Top Golf is actually a bad example if you are wanting to do away with tax incentives. They’re bringing a shiny new option to the area and it’s the sort of thing that could take off and do really well. Considering how much we do rely on Mexican shoppers it seems like we are in a unique position to want to bring in more retail and more diversity than El Paso could normally support in the effort to convince more Mexican shoppers to spend time here and do more when they come shop. Judging by how busy I see some parts of town that seems to be working.
You might be able to argue that hotels and medical practices don’t need lots of tax incentives because we have plenty of those but given how easily they seem to hand them out I’m kind of amazed that some of them don’t go for them.
I’m not an expert on tax incentives but it seems like they are documented somewhere in writing so anyone who is starting up or expanding a business can look them up and try to apply for them. Maybe they get them maybe the won’t but that seems about as fair as you can get. I don’t agree with you that “the less we let government interfere the better” but that’s much more of a philosophical debate. As it applies to this scenario It’s actually odd because I’m not sure where we would draw the line about “government interference.” We implicitly assume that collecting taxes and then building and maintaining infrastructure and public safety are things that have to be done so it’s bad when someone doesn’t pay their “fair” share but wouldn’t letting a business decide what to do with their tax money mean less government interference? We seem to be arguing because some business get a deal where they experience less government interference and other people/businesses who experience the normal amount of it are upset.
Top Golf already said they’d have come here anyway, the city jumped the gun. When tax incentives are used to draw a company to a location, it drag down other businesses and taxpayers in the area. The added cost of supplying the infrastructure for the new company is added on to the other taxpayers in the area. It’s an unfair advantage to the entity getting the tax incentives. While that incentive is in place, they profit more (don’t have to pay that money so it becomes “free” money) and have less to worry about. Let’s use hotels. Hotel A is an established business paying normal taxes, Hotel B is a new hotel with a tax incentive. Hotel B can afford more employees and more benefits because they’re not spending as much on taxes. Hotel A can’t hire more people and can’t apply more money to upkeep of the hotel or to other needs. Hotel B has an unfair advantage. At the same time, the city looks at the money not going into the coffers and ends up raising tax rates because they NEED that money not being paid by Hotel B, or they at least think they do.
Ooops, I think I threw part of this response in another comments. In a nutshell though Top Golf actually walked that statement back and said they did need the incentives. There are reasons they could have been lying in either direction so it seems pointless to argue about which lie is more likely.
In Top Golf’s case what new infrastructure is being added? They are going into a planned development that already paid for it’s infrastructure. Monticello already paid so that they could connect to Mesa, they paid for the Brio stops, and they paid for the water, sewer, and storm sewer lines that will be needed. Top Golf is basically a very unique tenant but the developer is the one who pays for infrastructure improvements within the City limits. Emergency services are another issue, those can be spread too thin because of new developments but again this is one situation where Monticello is a good development because they are infill development. The property that got incentives most recently is a little harder to pin down in that regard because on the one hand they are going to serve folks in the far west side so they won’t need to travel as far but they are far enough to the edge of town and big enough that they might add a non-trivial load to emergency services and those do suffer with more sprawl.
Honestly, to me, sprawl seems like bigger issue than tax incentives. I have no problem with Top Golf, Whole Foods, Specs, Sprouts anyone getting tax incentives to build or improve their businesses within town but I think they should only be given to properties that are at least 5-10 miles in from the edge of the City (or something like that). I think the city should stop letting developers go further and further out into the edges of the county because that’s what really taxes our resources. Building something as infill has negligible impact on the City resources, but building out in the edges can quickly become a problem (just look at how bad parts of the far east side have gotten).
As far as the hotel example goes, I would ask why Hotel A didn’t go after any tax incentives. They are available for renovations and improvements, not just new construction so it’s not like they were forbidden from seeking them out. Also has Hotel A been disputing it’s appraisal whenever possible? Remember these incentives are NOT forever and 5-10 years goes by really fast for a business. It’s entirely possible that at the end of Hotel B’s incentive period their property might be appraised much higher than Hotel A so then they’d be paying quite a bit more in taxes. What’s worse (or perhaps better) is that they might have been contractually prevented from fighting appraisals and Hotel A might end up ahead at that point.
Ms. Geek,
It’s easy to knock down straw men.
Tell me the part about the benefits of government interference again. That’s a good one.
If we aren’t giving money away by letting companies get huge tax breaks then they should do it for everyone. Every person who paid tax in El Paso last year should be excused from paying tax this year. But they still get to use the roads, police, fire, taxpayer-subsidized services, etc. Besides, they will borrow more money in the future to pay for things tax dollars are supposed to be used for now, like road maintenance. We get to pay multiple times for the same thing. But we aren’t giving anyone anything when we allow them to not pay taxes, those are the good guys. We need more of those. I want to be a good guy.