TIF Districts - The Good, The Bad, & The Ugly - Part 2

In part 1 of this series on TIF districts, I created a fictitious scenario where a TIF district was created, why and how.

In part 2, I want to go through some of the variations and how they contribute to a wide variety of purposes and uses for TIF districts.  If I had described a model motor vehicle with a sedan analogy, this part would give all the variety that would demonstrate the spectrum from moped to motorhome.

Size of the TIF District

Sometimes the size of the TIF district is larger than the project area itself.  This is because the bonds will not sell unless the buyers can be convinced that adequate money will flow from the District to make payments on the bonds that they buy.

Collateral for the Bonds

There is likely a different term in bond markets for what revenue streams will be used as collateral to repay the bonds.  Sometimes the area of the TIF district, even though quite large, will still be inadequate to generate enough tax revenues to cover payments on the bonds - especially in the early years.  Often, the first few years of payments are interest only AND the amount of those interest only payments is rolled into the bond issue amount - so the City is borrowing the amount of money needed for their part of the project plus the first few years of payments on that loan.

If the first 5 years still are not likely to generate enough TIF property tax revenues to cover the bond payments, another revenue stream will be used as collateral for the bonds.  In the case of the United TIF bonds, even though hundreds, if not thousands of acres of land were thrown into the District, the expectation was that the revenue stream would be insufficient for a while.  So, they guaranteed the bonds with County Option Income Tax revenues.

Uses for Which Bonds are Floated

Once a TIF District is created, it can be used to float bonds for a variety of uses.  If sufficient money flows into the TIF District fund, a second round of bonds for yet another project within (or near) the District boundaries can be floated.

Chime in if you think of a use for TIF bond revenues that I don't list here.  But, it could be for road and other infrastructure improvements, industrial buildings, commercial buildings, houses, renovations, and even complexes of buildings for a multi-use project.

New wrinkles have been introduced in just the last year that deserve community conversation.

One is the City's use of TIF bonds to provide a loan to a developer for the North of South project.  Another is the Fort Harrison TIF District decision to float bonds to build a strip mall with the hope of selling it to an unknown buyer in a couple of years.

Uses of Excess Revenue in TIF Districts

I'll go into how much excess money resides in the County's TIF Districts next time.  But, it is substantial in some.

The TIF property tax revenues flow into the TIF District fund.  The first obligation is the payments due on the bonds owed by that District.  Next is the creation of a positive fund balance that is large enough to convince bond buyers that the District has enough revenue to make future payments. 

After those two obligations are fulfilled, excess revenue can be used to pay off the bonds early and retire the District.  Actually, I'm not convinced that any District has actually been 'retired'.  The list that I have shows 'dormant' TIF districts, where the tax revenues from the District are divided among the various property taxing units of government - schools, townships, city, county, library, public transportation.  The use of the word 'dormant' kind of scares me that they could be put back into service tomorrow, if so desired by the Mayor.

Excess revenue in a TIF District could also be used for small projects that would not require new bonds.  Such things could be road or sidewalk improvements.  Just this past year, the MDC spent TIF money to build the 4th spoke from the ArtsGarden to the PNC building.  The MDC also created an interlocal agreement with the CIB this past year, that gives $8 million per year to the CIB from the consolidated downtown TIF. That money is simply being 'laundered' through the CIB in order to provide cash to the Pacers organization.

The City-County Council approved siphoning money from the Ameriplex TIF (part of the United TIF), laundering it through a middleman fund, to provide a one time $1.2 million to the Indianapolis-Marion County Public Library.

Consolidated TIF Districts

Sometimes multiple TIF Districts will be set up with the intention of working as one unit.  This was the case for the United TIF.  Then you have the consolidated downtown TIF, that I believe was consolidated after pieces were created for their own purposes -  please correct me if I have that wrong.

A couple of years ago, then Bond Bank Executive Director Kevin Taylor, gave me a map of all the TIF Districts in the County.  38 TIF Districts are shown.  I have a list from last year, showing the money flowing into the various TIF Districts - but with the consolidated districts counting as just one district, not the multiple component TIF Districts.  They amount to 30 TIF Districts, with 5 listed as "new" and not appearing on the map I got just 2-3 years ago.

Location of TIF Districts

From the map showing the location of the 38 TIF Districts, here are the number of Districts in each Township (of course, they are not of equal size or monetary value):

Pike = 1
Washington = 3
Lawrence = 2
Wayne = 6
Center = 18
Warren = 4
Decatur = 2
Perry = 1
Franklin = 1

The 5 TIF Districts listed as "new", 2 are in Beech Grove, 1 is listed as Pendleton Pike (so it could be in either Warren or Lawrence), 1 listed as Monarch (presumably Monarch Beverage that relocated to Lawrence), and 1 in Speedway.

So, there you have it - the moped to the motorhome of TIF District-ology.