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Commission to recommend more limits on local TIFs

June 28, 2012

A study commission on tax-increment financing will vote Thursday evening on a set of policy recommendations that would limit the use of TIF districts in Indianapolis.

Tax-increment financing has fueled the revival of downtown, the transformation of Fall Creek Place and growth of Dow AgroSciences’ northwest-side corporate headquarters. 

TIF districts capture growth in assessed value, thus increased property-tax revenue, to cover the cost of new infrastructure or other government spending. TIF skeptics, including Democratic City-County Councilor Brian Mahern, who created the study commission, worry that continuing to liberally use TIF districts for economic development will choke off revenue that’s already declined since Indiana capped property-tax rates in 2009.

The commission’s report is merely a set of recommendations, so it will be up to City-County Council members or state legislators to propose specific laws. If pushed by the Democrat-controlled council, some of those items would surely meet opposition from Republican Mayor Greg Ballard.

Deron Kintner, director of the Indianapolis Bond Bank and a member of the commission, thinks some of the recommendations would make Indianapolis less competitive in attracting development. Ballard’s strategy is to follow opportunities as they arise, he said.

“If it’s good for the city, it’s good for the city, and we’re going to go after it,” he said. “Other cities, other areas, they’re doing all they can to retain flexibility.”

One of the report’s 31 recommendations is to create sunset dates for TIF districts that have none. That would include the downtown TIF, which encompasses $2.6 billion of assessed value and captures $63.5 million in property-tax revenue this year.

Kintner would not want to create a sunset date on the downtown TIF, which was created in 1986 and has its last bond maturing in 2038. “I don’t know when you’re going to feel comfortable that downtown can thrive on its own,” he said.

The Metropolitan Development Commission routinely decides to release excess TIF revenue to the broader tax base, Kintner said.

Mahern took issue with the idea of leaving local government to the mercy of the Metropolitan Development Commission’s annual funding decisions.

“We don’t have flexibility to fund local government,” Mahern said in a June 21 discussion of the commission’s report. “We need this money.”

TIFs have been a widely used economic development tool since the 1980s, but cities around Indiana are probably having similar discussions about how they should use TIFs in light of the state's new tax structure, said Drew Klacik, a former Indianapolis planner and current senior policy analyst at the Indiana University Public Policy Institute.

"In a sense, the commission on TIF in Marion County is a signal," he said. "We're either going to change the role of local government, or we're going to invent a new tool."

Commission Chairman Steve Talley, a Democrat who is also chairman of the council’s metropolitan and economic development commission, acknowledged that members of Ballard’s administration disagreed with some of the recommendations but said he doesn’t expect major changes to the report that’s set for a vote Thursday evening.

“It’s been a spirited conversation,” he said.

Other members of the commission are Metropolitan Development Commission member Ed Mahern, a former Democratic legislator; State Rep. William Crawford, D-Indianapolis; Auditor Billie Breaux, a Democrat; Republican council member Jeff Cardwell; and city Controller Jeff Spalding.

Among other recommendations in the report:

— Focus the use of TIFs on blighted areas;

— Require a cost-benefit analysis as part of all TIF project applications;

— Build a TIF database and maintain TIF website for public access;

— Include representatives of local taxing units, such as schools and the library, on TIF project teams;

— Expand notice and reporting requirements to taxing units affected by TIF.

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