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Our View: Olive Garden loan appropriate

Published: Monday, Oct. 8, 2012 5:30 a.m. CDT • Updated: Monday, Oct. 8, 2012 11:40 p.m. CDT

The DeKalb City Council today is expected to discuss a request from Darden Restaurants for a $900,000 loan to help bring a new Olive Garden restaurant to DeKalb.

The council will discuss the issue as a committee of the whole at 6 p.m., and the public can speak about the proposal when the regular meeting begins at 7 p.m. in the City Council Chambers. There might be some people speaking out against the idea, for obvious reasons. The mere mention of government loaning money to private business can get people up in arms.

They complain that such arrangements are corporate welfare, they’re unfair to existing business, and that government should not spend taxpayer dollars on something for which they’re not intended.

Sometimes, they’re exactly right. But not so in the case of Darden’s request for a city-funded loan to help build a restaurant at the site of the old Small’s Furniture City building at 2211 Sycamore Road.

The key difference: Tax increment financing. That’s a mechanism by which governments seek to encourage development (or redevelopment) in “blighted” areas.

It works like this: When a tax increment financing district is created, the property taxes paid to government bodies by property owners in the area are frozen at a base level. As the property in the area grows in value over time, the property owners still pay more in taxes, but all funds above the base level – called the “increment” – are diverted to a separate account to be used for improvements.

The site where Darden wants to build a new Olive Garden restaurant is within a tax increment financing district the city created in 1986, and extended for 12 years in 2008.

The city created the district because it wanted to encourage redevelopment – and this proposal fits the bill.

There also are legitimate expenses associated with the project that would not be present if they were building an Olive Garden on vacant property – namely, demolishing an existing building and creating a suitable parking lot. City officials say this project would not be possible without the requested loan.

Darden is promising to repay the loan with sales tax proceeds over as many as seven years. Whether $900,000 is too much is up to the council. The money is there. The city’s tax increment account will have an estimated $2.9 million in it at the end of the fiscal year on June 30, 2013, according to today’s front-page story by reporter David Thomas.

It also is worth noting that Olive Garden was the business that people named most when asked what new shopping options they wanted in town in a recent survey. So the prospects of the business succeeding and continuing to generate tax revenue for years after the loan is repaid appear good. The company would have to repay the balance of the loan if it decided to fold the restaurant.

If there is a grand plan for the tax increment funds of which the public is not yet aware, that could be a valid consideration.

If not, loaning tax increment funds to a developer who wants to bring a wanted business to town seems appropriate.

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