The Tooth Investment Fairy (TIF) Comes to Tucson

Local Tucson media recently ran another rah-rah story about another development in the works for downtown Tucson, subsidized by the Rio Nuevo redevelopment district. This time, it is a bareboned Marriott hotel concept called a Moxy Hotel, which has a target clientele of “young adventurers” and isn’t actually owned by Marriott.

Of the $33 million cost of the hotel, the developers will put up $8.4 million, take out a $19.8 million loan, and get a $4.8 million handout from Rio Nuevo.

Who says that panhandling isn’t lucrative?

Given that the per-capita income in the city is a low $34,000, the $4.8 million is equivalent to the annual income of 141 Tucsonans. Where does Rio Nuevo get the money?

Does it come from a cash machine? A printing press? A tariff on avocados imported from Mexico?

No, the money comes from TIF.

Those initials don’t stand for “Tooth Investment Fairy,” but they do stand for something that is somewhat synonymous: “Tax Increment Financing.”

You’re not alone if you don’t know what that is or how it works. I know a little about it, but only because I’m a policy wonk—also known as a strange duck—and because I’ve lived in metropolises that have used TIF long before Tucson copied the idea, including the metropolises of Chicago, New York, Phoenix, and my boyhood hometown of St. Louis.

TIF seems to follow me around like the gnats that appear in Tucson during the monsoon season and buzz around my head on my daily walks.

Don’t worry. You don’t need to know how TIF works. All you need to know is that Tucson’s overlords have said it’s a good thing, that they’ve crafted an image of good stewards of hundreds of millions of dollars after misspending hundreds of millions the first go-around, that they are cheered by local media and never have to endure investigative reporting, and that there are now hipster bars, restaurants, hotels, and entertainment venues downtown, where Tucsonans earning $34,000 can pay 13 bucks for a drink.

Will there be an increase in per-capita income in Tucson now that downtown is spiffy? Ask the Tooth Fairy.

A good overview of how TIF works and its plusses and minuses can be found in the article at this link. An excerpt:

A TIF district emerges when the authorities first figure out the “base taxes” the area generates in its current condition, then extrapolate the base over a period of time (typically around 20 years). State and local authorities continue to receive these “base taxes” throughout the life of the project, and beyond. The authorities then estimate the increased tax revenue that will flow from the district once improvements are made. This increased tax revenue increment is made available up front to developers to help finance or jump start the improvements. Projects are preferred that wouldn’t occur “but for” the TIF financing (which gives us the “but for” provision in many TIF contracts).

The ostensible purpose of TIF is to revitalize blighted areas, which is a laudable goal when it works as marketed.

There can be four problems, however.

First, free money can attract hucksters and hypocrites of all political stripes, including avowed socialists who rail against special tax deals for the rich but love the TIF money. The same for avowed free-market conservatives who rail against handouts for favored businesses but love the TIF money.

Second, although it’s impossible to know what interest rates and the cost of money will be the day after tomorrow, TIF officials pretend to know with precision what tax revenue will be 20 years from now, what the opportunity costs are, and what businesses will be the businesses of the future. The one certainty is that today’s officials will not be held accountable if their projections are found to be off in 20 years.

Third, TIF districts tend to stay around and dole out money after they have accomplished their stated purpose. In Tucson, for example, local media and the Chamber of Commerce sing the glories of downtown. But if downtown is now so vibrant and such a magnet for business, then why do developers need a tax subsidy to build a Marriott there?

Fourth, the redevelopment of one blighted area often comes at the expense of surrounding neighborhoods and other blighted areas. In particular, downtown often becomes gentrified while other areas stay mired in crime, seediness, homelessness, and bad schools. If tax subsidies are such a swell redevelopment tool, then why not make every blighted area a TIF district? Heck, why not the entire city?

With a poverty rate of nearly 20 percent, Tucson has miles and miles of impoverished areas and wide swaths of extreme poverty. Why are they less important than downtown? Is that because government offices and the offices of law firms and other firms that feed off government are downtown?

My apologies for the cynicism, but, remember, I was born and raised in St. Louis, a city that is a leader in TIF districts as well as in crime and blight. Tucsonans can learn a lot from St. Louis about the good and bad of TIF redevelopment, as well as some interesting U.S. history.

At one time, the City of St. Louis was the fourth-largest city in the nation, but its population has fallen to 279,695, which is about 12 percent of the population of the larger St. Louis metro area. The city has a bad reputation, but get this: Its poverty rate of 19.8 percent is almost identical to the rate for the City of Tucson.

That’s right: An old industrial city that has lost population has almost the same poverty rate as a Sunbelt city that has gained population.

The reason for this paradox is that the St. Louis region has a diversified economy of manufacturing, chemicals, finance, healthcare, research, education, distribution, and services, along with a robust transportation network of highways (five interstates converge in St. Louis), air cargo and travel, railroads, and river transit.

Surprisingly, it also has a booming tourist industry. The St. Louis Arch attracts 2.4 million visitors a year, the world-class St. Louis Zoo attracts nearly 3 million, and the equally world-class Missouri Botanical Gardens attracts nearly 1 million.

Another plus is that it has plenty of water, which brings with it the negative of plenty of humidity.

Economic strengths keep the poverty rate lower than it would otherwise be in the City of St. Louis, because the strengths tend to counter the effects of incomes being dragged down by unfavorable demographics and the history of White ethnics moving to the suburbs to flee from the Great Migration of poor Southern Blacks and Whites to the city.

The surrounding suburbs are much more prosperous than the city, and many are now racially diverse, due to Blacks tending to move out of the city when they reach the middle class, just as the White ethnics did previously. The poverty rate is significantly lower than the national average for the 1.97 million residents of the suburbs. And some suburban towns are very wealthy, such as Ladue, which has a median household income of $250,000.

By contrast, Tucson has an economy of primarily retail, hospitality and tourism—all low-wage industries. Unfortunately, it has a history and culture of wanting to keep it that way. Moreover, although Tucson is home to the University of Arizona, which is a major research university with a medical school, it hasn’t spawned much technology transfer, business incubation, or venture capital.

Changing those dynamics should be the highest priority, instead of bringing more low-wage hospitality jobs downtown.

It’s instructive to know why TIF worked better in some parts of St. Louis than in others.

It didn’t work so well downtown, in spite of the magnificent Arch being there. Subsidized stadiums, hotels and other venues haven’t induced the so-called creative class to live downtown. Nor has a 15-year restoration project at the Gateway Arch National Park, where the Arch is located. The park is also the location of the Old Courthouse, where, in 1846, the infamous Dred Scott case was first decided. In addition, the Greek-Revival courthouse is where a farmer deep in debt signed papers in 1859 to free a slave acquired from his in-laws, instead of selling the slave and solving his debt problem. The farmer was Ulysses S. Grant.

The restoration of the Gateway Arch National Park cost $380 million. To the credit of St. Louisans and their community spirit, $221 million of this was private money. The Wall Street Journal recently detailed the effort and praised the results in a long article: “Eero Saarinen’s Vision Is Made Complete,” by Michael J. Lewis, May 22, 2025.

The arch and the Old Courthouse. Photo: BENJAMIN SCHERLISS/Gateway Arch Park Foundation

The problem with downtown is that there are too many dilapidated wharfs, factories and warehouses; and too many highways and railroad tracks that crisscross near the riverfront. In other words, the very things that made it an industrial powerhouse going back to the nineteenth century, and a major trading post going back to Lewis and Clark, are now a negative with today’s urbanites. There’s also too much crime nearby.

Redevelopment had better success in the neighborhoods several miles to the west of downtown, known as Midtown and the Central West End. Approximately 11 square miles in total, the combined area is roughly bounded on one side by St. Louis University, a Jesuit university with a medical school; and on the opposite side, 4.7 miles away, by beautiful Washington University, a selective, highly-endowed university with another medical school.

In between are tree-lined streets of brownstones, apartments, condos, and eateries; the restored architectural masterpiece of the 4,500-seat Fox Theatre; the stunning St. Louis Cathedral with its mammoth interior covered with beautiful mosaics; the huge and historic Chase Park Plaza Hotel; the medical complex of Shriners Children’s Hospital, Barnes Jewish Children’s Hospital, Washington University Medical Center, and St. Louis University Medical Center; and one of the prettiest and largest city parks in the nation, Forest Park, which, at 1,300 acres, is 500 acres larger than New York’s Central Park.

The Chase Park Plaza Hotel as seen from Forest Park.

The Art Museum and reflecting pool in Forest Park.

Forest Park was returned to its 1904 World’s Fair beauty as the result of suburban taxpayers voting to tax themselves for its renovation and continued upkeep. The park includes museums, the zoo, a science center, a planetarium, a tennis stadium, a golf course, an ice rink, an outdoor opera, athletic fields, picnic grounds, a riparian area, woods in their natural state, and lagoons where electric boats can be rented—all connected by pretty walking/biking trails.

The regional light-rail system runs along the Central West End. It has 46 miles of track and 38 stations. Much of it runs on old railroad lines.

The lesson that can be learned from the foregoing is that TIF districts and redevelopment in general work better when centered in authentic mixed-use, mixed-class neighborhoods of historic charm, marked by classical buildings and ample public spaces waiting to be brought back to their former beauty and architectural appeal. Also important is an efficient transportation network that connects to high-paying jobs and cultural attractions in a metropolis with a diversified economy.

Too many downtown redevelopments are the opposite. They are as artificial and as removed from real communities as Disneyworld or a cruise ship.

Mr. Cantoni can be reached at craigcantoni@gmail.com.