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Hicks: Rein in tax increment financing districts

October 4, 2014

A brand new Dick’s Sporting Goods store is opening in Muncie near my home. Because my next major sporting goods purchase will be a pair of size 13 cleats for my 14-year-old son, I will visit the store shortly.

This store sits in a tax increment financing district, so it raises a lot of important questions about the role of government in supplying athletic footwear to a middle school linebacker.

The TIF structure in Indiana is similar to that of other states. A property is designated a TIF district (redevelopment district in this case) and increased taxes due to new development are used at wide discretion of the redevelopment commission. In this case, some of the money appears to be directed initially at providing infrastructure to lure Dick’s and a couple of other retailers.

Because these districts never go away, the redevelopment commission will have many opportunities over the coming centuries to think of other uses for the money. To no surprise, this raises many legitimate policy questions.

Improving the retail mix in Muncie would make it a more attractive place to live and bring some jobs. This is good, of course, and a typical study from accounting consultants adds up the jobs Dick’s says it will create, then reports that as the employment benefits. That is nonsense and is why it is as hazardous to ask accountants about the economy as it is to have an economist do your taxes.

New cleats from Dick’s won’t be new economic activity, but rather a shift in spending at the expense of other local sporting goods and apparel stores.

Competitive markets are necessary for a growing economy, but in this case Dick’s has been subsidized by taxpayers.

The problem for Muncie is more than simple fairness. Since Dick’s and both other sporting goods stores are in the school district, this TIF will limit or reduce future tax revenue for schools.

Most Indiana communities need a lot of work on their quality of place and many need the tool TIFs provide. But they also need to think about TIFs more wisely. As a first step, the Legislature should limit their duration and allow school boards to vote on their approval.

I hope this turns out well for Muncie, a city that is finally doing most of the right things. Maybe some of these TIF dollars will find their way to school programs. That’s real economic development.

Still, no family needs local government helping us choose where to buy athletic shoes.•

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Hicks is the George and Frances Ball distinguished professor of economics and director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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