You simply must wonder what wrong turn your life took when you find yourself energized by the geeky, wonky, TIF-er-ific lecture/discussion that happened at last night's opening TIF Study Commission meeting. That is the situation I find myself in this morning.
WCTY, our government channel was present, capturing it all for your viewing pleasure. As of this moment, it has not been posted, but I'll post a link as soon as I see it go up. [Edited to add link to the March 27 meeting - click here]
The TIF Study Commission falls out of City-County Council Prop 70, which set its composition and broad agenda. On the panel are Councillor Ryan Vaughn, Controller Jeff Spaulding, Councillors Steve Talley and Brian Mahern, Auditor Billie Breaux, Bond Bank Executive Director Deron Kintner, MDC President Ed Mahern, and State Senator Bill Crawford. Kintner was absent last night and sent a 'proxy', but I am afraid I did not get her name.
Missing last night was the taxpayer perspective, which left me squirming in my seat and my head flooded with my own internal comments.
Much information was thrown out there. Bruce Donaldson, Attorney with Barnes & Thornburg, gave a overview of what the law allows TIF to be set up for and how TIF funds can be spent as well as the process whereby a TIF district is legally established. Deputy Mayor Michael Huber was up next, going through the TIF philosophy of the Ballard administration. Jeff Spaulding joined in for more of the administration's perspective on why use a TIF over other means of economic development. Taking up the rear and pretty much rushed due to the late hour, was the Director of the Department of Metropolitan Development, Maury Plambeck. Plambeck went through examples of the variety of TIF districts we have in Indy.
More detail is assured for future meetings. So, let your geek flag fly !
Here are some of my observations from the cheap seats.
Billie Breaux brought up one of the great points last night - since you can create TIF districts to help spark redevelopment or for general economic development - why do we seem to be doing mostly the latter? This really struck me as pertinent. There is evidence that using TIF for economic development only moves economic development from where it would occur organically, to a location of the government's choosing and profits a developer of the government's choosing. It does not accomplish much more. But, trying to turn around a truly blighted area, is a different matter. We can identify and prioritize, if you will, the areas most in need of a catalyst to improve a blighted area. For the rest, we all want development in our neighborhoods, and prioritizing is more open to political interpretation.
I mentioned it earlier and it bears repeating, missing was the taxpayer perspective. A number of platitudes were uttered last night that we have all heard before. They are the 'promises' of TIF districts that do not necessarily come to fruition and for which TIFs are not necessarily the best approach.
Spaulding mentioned "a rising tide lifts all boats" - that is true up to a point. The never ending TIF district, however, has built around it an imaginary retaining wall - so the 'tide' cannot escape to outside areas to lift the 'boats' found there. Huber opined that expanding the consolidated downtown TIF to nearby neighborhoods is way to share the wealth within that district. I say, pay off the bonds, dissolve that TIF and let us all partake in the wealth.
On the same topic, Huber said that the development in a TIF would not have happened without the TIF, so it benefits all taxpayers. While that is debatable on its face, by ending a TIF you would definitely help all taxpayers. It might be a few dollars per taxpayer, but the aggregate it stunning. The TIF districts in Marion County take in over $100 million a year in property tax revenue. If those TIF districts were retired, it would set off some critical dominoes. First, the tax rates throughout the County would drop. This makes Indy more attractive to homeowners and business owners alike. It also means that fewer people hit the property tax caps. When fewer people hit the tax caps, more money flows to the taxing units like the schools, the library, IndyGo, and the City. When more money flows to the taxing units, more services or higher quality services can be provided. This increases the quality of life in Indy, again improving the attraction of our city for people to live and work. And, lets not overlook the impact on the taxpayers for those property tax savings. For some, it means a better chance to keep their homes or business, and for others it is disposable money left in their pockets that can be spent on restaurants or new equipment or new cars, etc, etc, etc. Retiring TIF districts can fulfill one of the promises made when the TIF was created - that it will benefit everyone. When you do not retire the TIF, it only benefits those within the district, since the rest of us are footing the bill for the necessary public services that they still enjoy but do not pay for.
Mentioned by Donaldson was the idea that the tax revenue coming from a TIF district before day 1 of the district, will continue to flow to the schools and library, etc, after the TIF is formed. This is called the 'base'. He noted one readjustment as the tax caps were initiated that allowed a new calculation for the 'base' of our TIF districts, so that the new laws would not impede the City's ability to pay off existing bonds. He did not mention that this readjustment is done annually. I have blogged on the base and the annual calculations that the Auditor must submit before (see "TIF Districts - Who Knew The Base Could Drop?") . From 2010 to 2011, these re-calculations caused $43 million in property value to be moved from the base, into the TIF revenue. That was likely due to the drop in property values caused by the bursting housing bubble and recession. But, if you look at the forms, there is no way that the value will be returned to the base once the recession is over. The forms leave you with a choice - either stick with the same base as last year, or let it drop to recover more money to pay the bonds of the TIF district.
So, dear reader, if you've gotten this far, I thank you for your perseverance. Its geeky, nerdy, wonkish stuff to be sure. But, TIFs can be a promise for a better future, or a drain on the rest of us, or a slush fund, or all simultaneously. As taxpayers, as citizens of a City we all want the best for, we owe it to ourselves to get at least ankle deep in the topic and lend our guidance to our elected officials as they try to navigate the best course for TIFs in Indianapolis.
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Mark Small posted a blog post
19 hours ago
8 comments:
A couple things to consider.
First, the state has so disempowered municipalities that TIF is one of the few vehicles available for doing things these days.
Secondly, I believe TIFs used to be allowed to last up to 50 years. Now they are limited to 20 years. So I'm sure the idea is to hold on to some of those 50 year TIFs as long as possible since they can't be created anymore.
1. If you immediately ended all TIF's, wouldn't you still have to repay the bonds, but out of general, not TIF revenue?
2. While it's lovely to think that all development would happen without the assistance of a TIF, doesn't it at least hold that more development might occur with that assistance?
Aaron - yes, the Legislature dropped the limit, and yes the locals seem interested in keeping the grandfatherer TIFs - but that does not make it in the best interest of the public to do so. It looks like the Commission is interested in alternatives and the various pros and cons. Which is what you want your City leaders to do - use some analysis to decide which tool in the toolbox is best suited for which job.
Anon -
1)You are correct, all TIFs cannot be ended immediately - probably none can because of the existing bonds that rely on that revenue stream and the slim fund balances. I was simply looking at the ultimate benefit to the taxpayer for moving in the direction of paying off the bonds with all due haste and retiring the TIF districts after.
2)There is evidence that TIFs do not increase the amount of development in a City, just makes specific locations more attractive to the developers. This suggests that the City leaders are simply picking the 'winning' neighborhoods and the 'winning' developers and a) not trusting the free market, nor b) increasing the total amount of private development.
I'd be really curious to hear that evidence. The theory, obviously, derives from the fact that Indianapolis has no other way to increase revenues, under tax caps, except to increase its AV. If it can somehow encourage a parcel's development, and by doing so, increase the value of surrounding parcels, once the bonding is paid off, the goal is accomplished. While a single development is never the exclusive reason for the increase in AV beyond its respective boundary, areas that have seen little or no development for a considerable period of time would appear likely to see some sort of positive effect from the strategic development of those parcels. That's admittedly just a verbose way o saying that if you choose the right catalyst, at the right price, you get something out of it.
Anon - I understand what you are saying, and they are good points. I do think, though, that we need to weigh the effect of abatements, TIFs and outright 'gifts' of tax dollars on the tax caps. We cannot continue to shoot ourselves in the foot and curse our shoes - which is my Edith Bunker way of saying that our leaders may choose to curse the tax caps, but their fiscal policies cause the tax cap problems to begin with.
I'll dig out that link to the study and post it in a bit.
The problem is that with the levy cap, even if your A/V increases because of massive commercial development or some such, your town might not be able to take in much money.
Aaron - the TIFs also increase the caps. See a couple of entries after this one :
http://hadenoughindy.blogspot.com/2012/04/tif-study-commission-meeting-2-tif.html
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