When should government give businesses a boost?

When is it appropriate for government to give private businesses a boost? The simple answer is when it serves the public good.

One example is the large apartment building being built at 601 W. 19th St., across from Black Tooth Brewing. The project, called West End Flats, is a five-story, 101-unit apartment complex, which will include 17 studio units, 51 one-bedroom and 33 two-bedroom apartments.

The project got off the ground in the city’s West Edge, along with an even bigger project on the city’s east side being developed by the same company, 97 apartments in the first phase, thanks to the city’s creation of an urban renewal project utilizing Tax Increment Financing (TIF). By these projects being within areas declared blight, Cheyenne leaders were able to use this unique funding mechanism to make these projects happen.

TIF 101

Tax increment financing works in slightly different ways, depending on the state in which it is used, but it’s basically a way for local communities to help spur economic development that wouldn’t otherwise happen without the help. Best of all, it doesn’t involve the government giving money to the business (which isn’t allowed under the Wyoming Constitution anyway).

After City Council approval of an Urban Renewal Authority project, property tax distribution to local agencies funded by property tax is frozen for the term of the project. In Wyoming, property taxes are distributed among a variety of agencies that provide essential public services including the county, city, school district, conservation district, community college and others. This means an agency will receive the same property tax revenue for a specified time period, usually between 15 and 25 years.

The property owner will not see a reduction in their tax bill during this time, and as value increases, their property tax bill will increase, and any additional property tax collected is pledged to the developer or lender to reimburse them for eligible project costs.

Once the TIF collection period expires, the local agencies get to reap the reward of much higher tax revenue from the redeveloped property. If no TIF collection had occurred, the property would have likely remained underdeveloped, and a large increase in tax revenue would have not occurred.

If done right, this short-term tax deferral is a win-win. In the case of the downtown apartment building, Cheyenne will reap the benefits of people living in the West Edge district of downtown, which they’re working to redevelop, and businesses in that area will likely benefit from increased foot traffic.

Does that mean anyone who wants the City Council to create a TIF district should automatically get one? Of course not. For developers, TIF should only be used when there is a funding gap that would prevent a project from moving forward. City leaders need to have a solid, easy-to-understand set of guidelines for when they enable a TIF project, and council members need to carefully evaluate each proposal to determine whether it serves the public good and the return on investment is worthwhile. They are expected to do just that with redevelopment of the Bell Building on Central Avenue.

Not the first time

A similar approach was used to spur redevelopment of the former Hitching Post Inn property on West Lincolnway, which required more than $2 million just to remove the old, burned-out hotel buildings. The return on investment for this redevelopment effort wasn’t going to work without the TIF.

TIFs have also been established for West 15th Street and the Hynds Building/downtown “hole.” Areas like the Reed Avenue corridor and 15th and Lincolnway east of the Historic Depot have been declared blight to allow for developers to request TIF for future projects.

Cheyenne Mayor Patrick Collins has been lobbying the Wyoming Legislature to allow municipalities to utilize TIF to spur construction of affordable housing, arguing that this funding mechanism is constitutional because it helps low-income residents.

Like many states, most of Wyoming has a serious lack of housing, which is preventing the state from growing its workforce. That, in turn, deters businesses from setting up shop in the Equality State. Allowing communities to provide this type of incentive to developers has no downside, as far as we can see, and plenty of upside.

Unfortunately, state lawmakers rejected a bill earlier this year that would have done just that, and there appears to be no appetite to try again during the 2026 budget session, which requires non-budget bills to get a two-thirds vote of support for introduction.

Other ways to help

Government offers tax breaks to business and industry in other ways, too, of course. One that has made Mayor Collins the target of some online criticism in recent months is the sales tax exemption for data centers in Wyoming.

During an August meeting of the Wyoming Legislature’s Joint Revenue Committee, he urged state lawmakers to maintain the exemptions on the purchase of computer equipment for these businesses. While there’s no current proposal to end this exemption, some legislators have asked for proof of the return on investment.

As the mayor explained, these facilities must replace their expensive computer equipment every three to four years. With as many as 30 other states offering a similar tax exemption, Wyoming wouldn’t be able to attract such businesses, even with its lower temperatures that allow for natural cooling and reduced energy usage.

In return, the government entities collect tens of millions of dollars in both business and personal property taxes on these facilities, as well as similar amounts of sales tax on the energy they buy.

Are these multi-billion-dollar corporations? Yes. But would they be here without such incentives? Almost certainly not, which is why former Gov. Matt Mead pushed for the tax exemption back in 2012 to attract Microsoft to build its first Wyoming data center in Cheyenne. Today, the company co-founded by Bill Gates is the top personal property taxpayer in the state.

(And to those who are concerned about high energy use leading to higher personal utility bills, we offer this reassurance: Thanks to Black Hills Energy and its Electric Large Power Contract Service Tariff, Wyoming residents are insulated from the problems being experienced in other parts of the country. For more information, visit ir.blackhillscorp.com/regulatory-tariffs.)

These are just a couple of examples of the benefits of public-private partnerships. Instead of grousing about them online, residents should be thanking government officials for their efforts to spur economic development and generate additional tax revenue to fund essential services, as well as pressing state lawmakers to allow more such efforts.