Wednesday, April 18, 2012

Third TIF Study Commission - Heavy on Theory, Light on Practice

Last Thursday's TIF Study Commission meeting was the first I found unsatisfying.  Sure, the over three hours was chock full of high level information - the theory of how TIFs are set up and operated.  What was missing, however, was any mention or examination of the actual practice used for TIFs in Marion County.  This thought took a while to perk in my head, and I think the best way to express it is to list the instances where I saw the theory stated, but the actual practice left unmentioned.  And please note, I surely do not know all the ways TIFs are set up and to what purposes their funds have been put.  So, this a highly limited reflection on what was missing last Thursday.

The first instance of a divergence I noticed was actually in a recital of what purposes abatements could serve.  The theory stated was that residential abatements could be granted in places which were either 'residentially distressed' or for multi-family residential projects for low income or mixed income tenants.  What popped into my head was the abatement granted in the Peterson administration that was part of the incentive package for the Conrad Hotel.  The condos on the top floor were given an 8 year abatement - and clearly the area is not residentially distress, nor are these condos for low or even mixed income tenants/owners.

Thus the divergence struck me and here are more examples from the evening:

The theory -- the option to float Midwest Disaster Area Bonds were mentioned as being set up by the federal government to help recovery from 2008 flooding in the Midwest.  Marion County experienced this disaster and so is eligible for these tax-free bonds.  It was stated that these bonds are floated on the credit of the developer, not the municipality.

The practice -- the only instance of Indianapolis/Marion County using these bonds that I know of was for the North of South (aka City Way) project.  However, neither the credit worthiness of the developer, nor the investment worthiness of the project was used to sell those bonds.  It was the promised of a repayment revenue stream from the Consolidated Downtown TIF that was used to sell those bonds.

The theory -- Certified Technology Park designation, with the approval of the Indiana Economic Development Corp., must be used for 'public facilities' and the tax revenues redirected to the project may only be used to reimburse the City for its contributed infrastructure improvements.

The practice -- again we have to turn to the North of South (City Way) project that did not really have any tech component, but borrowed the relocation of some staff of Rolls Royce several blocks away to qualify. The redirected tax revenues are not going to repay the City for infrastructure, but rather to pay for the financing fees associated with floating the Midwest Disaster Area bonds.

While we are still on North of South (City Way), I must note that for the umteenth time, Deron Kintner, Director of the Bond Bank, said that no abatement was given to the project.  Then what do you call it when all property taxes 'paid' by the project for 10 years does not go to the taxing units, nor does it go to the Consolidated Downtown TIF fund?  It is being credited entirely to the developer and regarded as partial repayment of the bonds by the developer.  That sounds like a 100%, 10 year abatement to me.

The theory -- it was said that the purpose of TIFs are to build the tax base.

The practice -- two thoughts come to mind on this one.  First is the United TIF; since this was to provide for a non-taxable building on non-taxable land, then this TIF missed the mark by quite some distance.  Additionally, when you never retire a TIF district, then building the tax base is not really building a public asset, rather it is building a slush fund.

The theory -- a list of projects funded by the Consolidated Downtown TIF district was shown; things like Circle Centre Mall, Union Station, and the JW Marriott.

The practice -- not listed but leaping to mind is the $8 million per year going to the CIB (cough, pacers, cough), the $40 million being drained to balance this year's City-County budget, and the $600,000 to build the fourth spoke to the Artsgarden.

I hope the discussion can move to the actual practices being employed here in Indy.  Some are excessive and unwise, in my view.  But at the end of the day, if the Commission does not drag them into the open and discuss them, then they stand less chance of fixing what really ails the implementation of TIFs in our City.

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