MICHELE NORRIS, host:
In Kansas City, a newly popular kind of public financing is being credited for the beginnings of a downtown revival. It's also covering road and infrastructure repairs. It's called tax increment financing, or TIF. And many communities have come to rely on it to encourage business growth.
TIF was originally intended to develop blighted areas. It works by returning some of the taxes generated by a project back to developers to help cover the costs. But critics worry the city has handed out tax breaks too freely.
Maria Carter reports from member station KCUR in Kansas City.
MARIA CARTER: The president of Kansas City's Economic Development Corporation, Jeff Kaczmarek, looks out the window of his 17th floor corner office on the city's Downtown renaissance.
Mr. JEFF KACZMAREK (President, Economic Development Corporation, Kansas City): The H&R Block World Headquarters is there right off of us. Over on that side, Sprint Center. And in between the two is the Power & Light District.
CARTER: This sparkling glass landscape is part of a $4-billion Downtown building boom, helped along by tax increment financing. In Downtown, TIF's helping to pay for repairing potholed pavement and replacing century-old sewers without dipping into the city's budget.
Mayor MARK FUNKHOUSER (Democrat, Kansas City): Oh, and it sounds wonderful. It sounds like magic.
CARTER: But Kansas City Mayor Mark Funkhouser knows it's not. He has a more street level view of TIF as he stands outside Niecie's, a small restaurant serving chicken and waffles all day.
Mayor FUNKHOUSER: It's got challenges. If you look at the infrastructure, you've got weeds growing up out of the storm's drain over there. You've got the sidewalk that's completely broken.
CARTER: The mayor says TIF has largely ignored economically challenged areas. Instead, favoring Downtown and growing neighborhoods.
Clay County auditor Vic Hurlbert watches customers order coffee and blueberry bagels at a (unintelligible), built with the help of TIF. He says each cup of coffee bought here can hurt the county's bottom line.
Mr. VIC HURLBERT (Auditor, Clay County): If there used to be a Ma & Pa coffee store over there at Liberty, and there was, a lot of people are now coming here.
CARTER: For each person who buys breakfast in a TIF district, the county, the city, and all the local taxing jurisdictions get only half the sales tax. The county and schools have representatives on the TIF commission, but little overall say on whether projects are approved.
Consequently, David Smith, the school board president for the Kansas City, Missouri district, says his district, so far, has been left out of TIF's bounty.
Mr. DAVID SMITH (School Board President, Kansas City, Missouri District): We've missed one of the biggest development booms in the history of the city, and you can't go back and undo that.
CARTER: The district estimates that it has lost out on some $44 million in property taxes over the past five years. Money that Smith says is needed to tackle $200 million of renovations to pay for such things as inadequate heating and cooling systems, out-of-date science labs, and deteriorating athletic facilities.
Indiana University economics professor Craig Johnson says TIF is just a tool for economic development, one that could be used or misused.
Professor CRAIG JOHNSON (Economics, Indiana University): I think if they followed the original intent of TIF, I think it can work well to finance redevelopment projects in blighted areas. When they stray away from that, I think that's when they run into serious problems.
CARTER: Now, Kansas City is in the middle of creating a new TIF policy. Its city council is considering a plan that emphasizes high paying jobs, small business growth, and development in poor neighborhoods. It also would check up on TIF projects to make sure the city is getting what developers promise.
For NPR News, I'm Maria Carter in Kansas City.