City budget and City Government and Local Government and Greg Ballard and Banking & Finance and Taxes and City-County Council and Tax Caps and Government & Economic Development and Government

Councilor seeks review of city's TIF-district strategy

February 11, 2012

Mayor Greg Ballard’s plans to expand a downtown tax increment financing district and add four more such zones in surrounding neighborhoods may soon hit a snag.

The Republican mayor hopes to add the 16 Tech corridor and parts of Mass Ave to a downtown TIF district and to replicate downtown’s progress using tools such as TIF districts on a neighborhood level.

The districts, which capture property taxes on development to reinvest in roads, sidewalks and new buildings, are a powerful economic development tool. But it isn’t clear how well the city’s more than 20 TIF districts are working since revenue and expenditures aren’t tracked in a comprehensive manner.

Brian Mahern Mahern

Brian Mahern, a Democrat on the City-County Council, plans to propose a study commission to examine the effectiveness of TIF districts, how property tax caps will affect them, and ways to increase transparency for the complicated financing vehicles.

It’s important TIFs are prudently managed since they divert property tax money from traditional recipients, such as schools and libraries, which are being squeezed by property tax caps.

Marion County’s TIF districts annually funnel hundreds of millions of property tax dollars to fund infrastructure and other improvements to neighborhoods. They also are a key source of funding for new projects on the mayor’s drawing board.

“I don’t think anybody’s hiding anything,” Mahern said. “I just think the city’s TIF districts are not being managed in a comprehensive way. When there’s a request to understand the landscape in its totality, it’s difficult to do. There’s not a 100,000-foot view to understand how these things are operating, how they affect each other and who’s responsible for coordination.”

Mahern’s proposal suggests: an online database of Marion County TIF districts’ funds and expenditures; establishment of new performance standards for TIF districts; and new consequences if private development doesn’t meet benchmarks.

Deputy Mayor Michael Huber said he supports more transparency and sees no downside in studying the use of TIF districts, but he does not want to put the city’s economic development efforts on hold in the meantime.

“My sincere hope is we can do both, study and continue progress,” Huber said.

Mahern said it’s difficult for him and fellow council members to judge the mayor’s new proposed TIF districts without “a broader view” of the districts’ finances.

His proposal for a study commission arose out of the city’s slow response to a records request by Marion County Auditor Billie Breaux regarding TIF revenues and expenditures, and decisions by the Mayor’s Office that Mahern says make the consolidated downtown district look like a “slush fund.”

“I think there’s a broad acceptance that things need to be done differently with regard to TIFs,” he said.

Mahern is asking for an eight-person commission, including three City-County councilors, a state legislator, the executive director of the Indianapolis Marion County Public Improvement Bond Bank, the Marion County auditor, Indianapolis controller and a representative of the Metropolitan Development Commission.

The group would be charged with preparing an interim report by the end of April, with final recommendations due by the end of June.

The study could mean it takes longer to approve the mayor’s requested new TIF districts, Mahern said.

The Democrats took control of the City-County Council this year, but there’s no guarantee all will stand with Mahern. Constituents tend to support new sidewalks and development projects in their neighborhoods regardless of how they are financed.

“If it’s a good idea and an appropriate thing to do, I don’t understand the rush,” Mahern said of the new districts.

Having a public discussion about TIFs is a good idea, particularly if civic leaders can steer clear of politicizing the issue, said Mike Shaver, founder and president of Wabash Scientific Inc., a locally based consulting firm specializing in economic analysis, planning and economic development.

“My job is making people comfortable they’re not signing a blank check,” he said. “I’m much less averse to the public discussion because that’s what I do. Democracy doesn’t work without transparency.”

There are good TIFs and bad ones, and if municipalities aren’t open to digging into what works, they’ll keep making mistakes, Shaver said. Districts that primarily fund infrastructure tend to be the safest.

The evaluation of whether an economic development revitalization area is successful should look at property taxes primarily, but also secondary factors like employment taxes and incomes, he said.

The first step, though, is a willingness to consider the big picture.

“The mayors don’t necessarily want oversight for a number of reasons, ranging from petty financial squabbling to, they simply don’t want to spend the money,” Shaver said.

The question for Pat Andrews, a neighborhood activist and outspoken critic of many of the city’s decisions on TIF, is whether the districts ultimately deliver on promises made when they were formed.

Andrews said she’s keeping an open mind on the answer. She suspects it will be a mixed bag, including strong districts and underperforming ones.

“Excellent, awesome,” she said of Mahern’s proposal, particularly the idea of posting more information about TIFs online. “If you have a true understanding of how this economic development tool works, you can make it better.”•

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