The Akron school district has to refund all at once $3.2 million, most of it payments it should not have received from tax increment deals in the city. The hit to the district’s budget couldn’t have come at a worse time. The district is on the ballot for new operating money. After millions of dollars in budget cuts in the past few years, school officials have made it clear that with or without new money, they still need to trim millions more in operating funds to close a deficit already projected to be $9 million next year.
All that painful squeezing was necessary before the county fiscal office docked the district’s August real estate payments $3.2 million on tax increment payments and other adjustments to commercial property values. Worse yet, because required state approvals are pending for other tax-increment deals, the school district is likely to lose an additional $2.1 million from tax income due in March. In short, school officials must reckon with a budget hole that suddenly is deeper than they anticipated, raising the likelihood of more staff and teacher layoffs and cutbacks in programs that affect the quality of classroom education.
Tax increment financing, TIF, is a crucial redevelopment tool. It gives cities like Akron some financing flexibility to upgrade infrastructure and improve services, enhancing the economic appeal of areas that businesses otherwise would not locate. Typically, TIF agreements freeze land values in the development area, the rising tax revenues as the area thrives used to finance further redevelopment and pay off loans and bonds.
The problem for school districts is that TIF agreements that cap property valuations and redirect years of future tax revenues to other uses reduce much-needed income for schools — unless there is a separate agreement (which exists between Akron and the Akron Public Schools) to make up some of the lost revenues.
It is dismaying that the process for reimbursing the district remains so flawed as to make the district vulnerable to nasty surprises. In this instance, the district assumed — incorrectly, it turns out — that it was receiving correct payments, some of them dating back four years, from the fiscal office. Equally disturbing is that the state has a backlog of four or more years in approving TIF agreements.
City and school leaders in Akron long have recognized their mutual interest to ensure that both the city and the district can thrive. The current budget problems in the school district threaten to undermine years of work to raise the quality of public education in Akron. To avoid such unsettling surprises in the future, it would serve the city and district well to negotiate with the county some system to hold a portion of TIF payments in escrow, pending state approval.