February 27, 2004

Twins want to get STIF

Add one more team to the tax increment financing bandwagon: the Minnesota Twins have become the latest sports franchise to ask that taxes from a new stadium project be kicked back to pay off construction costs. While TIFs have been widely used - and, some say, abused - as a means of rebating property taxes on development projects, the Twins proposal would be the rarer sales tax increment financing, or STIF, using both team income taxes and sales tax on everything from tickets to hot-dog projectiles to subsidize stadium bonds. (The proposed Brooklyn Nets arena would use a similar funding scheme.)

STIFs have never been used in Minnesota, and in those states where they have been used, they have a checkered past: as finance expert John Mikesell has written in the one substantial study of STIFs, sales taxes "are less suited for use in tax increment finance programs" than property taxes for several reasons, including the volatile nature of sales-tax receipts during lean economic times, and the difficulty in determining how much sales tax activity is "new" and how much is merely cannibalized from spending in nearby areas. (California repealed its STIF law in 1993 for precisely this reason.) Minnesota Gov. Tim Pawlenty apparently concurs, with a spokesman saying of the Twins' STIF pitch: "I know the governor won't be supportive."