Wednesday, July 25, 2012

Indy Star Editorial Dead Wrong - More Information Needed to Substantiate TIF Expansion

The Indy Star Editorial Board wants you, Mr. and Ms. Taxpayer, and the City-County Council to buy a pig in a poke.  Not just any pig, mind you, its a downtown pig - so who needs details?

In today's Editorial, "Put Mass Ave on faster track", the Board repeats the same old, unfounded and untrue, myths about TIFs to push for the expansion of the consolidated downtown TIF to fund development along Mass Ave.  The alternative they are brushing aside is to actually implement the recommendations of the TIF Study Commission in order to set criteria for the proper evaluation of this TIF proposal.

Where to begin?

Lets start with the idea that before a TIF is created, it is reasonable for those empowered to make the decision to ask for data that demonstrates the need for TIF financing of a particular project.  Information that demonstrates the need for -- THIS TIF - in THIS place - with THIS footprint - for THIS project.

The public has the Council Proposal 15, the text of which lends no information of any value, and the MDC resolution, which I uploaded some time ago to Google Docs.  This resolution includes the  Mass Ave area as expansion #2.  It is 112 acres covering 132 parcels.  Beyond that, there is no information.

So, we do have information on what TIF is proposed, in what place.  But why does the footprint have to be so large?  What exactly is the project to be funded with the proceeds of the TIF expansion?  How much money is the City hoping to contribute to the project?  For what - just streets or are we footing the bill for developer costs? 

A really large question is why this proposed TIF would include the assessed value of EXISTING development.   It begs the question: If those people who invest in such bonds, need not only the security of the best performing TIF in Indianapolis (the downtown TIF) but also tax revenues from existing development in the expansion area - just how risky IS this project and its repayment?

And this leads to another really large question - if there is already development in this area, why do we need to tie it up in a TIF?  What happened to the 'but for' test?  This is the seat of your pants test that can't be described beyond - you just know it when I feel it.  The idea is that 'but for' the TIF financing, the project would not happen.  But development is already taking place here.  The free market is working.

What is the project?  All we know is that there are three finalists in the running - none of which have been disclosed.  In his article in yesterday's Star, Jon Murray reported:
The finalist teams have not been named publicly or their projects released.

Deron Kintner, executive director of the Indianapolis Bond Bank, said the initial proposals were submitted in October, and all the five proposals originally considered as contenders relied upon TIF assistance.
Really?  They ALL proposed TIF revenues as the exact form of government assistance???  Now how did that happen?   But, I get off the point.

We don't know anything about the magnitude of the government (taxpayer) assistance involved, for what, or for whom.  We do know that the City is so loose with money that the broker stands to make $1 million on the deal (see Cory Schouten's article "Mass Ave deal's brokerage fee raising eyebrows")

The TIF Study Commission recommended that key evaluators be applied to any proposed TIF so that it could actually be evaluated.  But, for the Star Editorial Board, this goes too far.  They are content with the limited information currently available, that gives no Councillor and no taxpayer any real tools to take an honest look at whether this TIF is in the best interest of the community at large.

So, where are we?  The Star editorial ignores the fact that we have few specifics with which to evaluate the proposal that the downtown TIF be expanded to include 112 acres and 132 parcels to finance the development of one parcel.

But, the editorial does not fail on that point alone.  They perpetuate the TIF myths once more.
Under TIF, a city locks in a site's property tax contributions at its current level.
I have gone into this several times before.  The base tax revenues are subject to being converted into TIF revenues if the district underperforms for any reason, including recession.  See yesterday's post for some of the gory details.  Suffice it to say, even our holy downtown TIF has 5 of 8 districts whose base has dropped to ZERO.  BUT, this statement is all the more egregious because the proposed Mass Ave district would include already developed parcels in the TIF, deliberately excluding them from the base.
To further attract development, the city also provides enhancements that can include street improvements, parking and landscaping.
Under this Mayor, TIFs are also used to provide $8 million more a year to the Pacers and give a nearly $100 million loan to a developer who could not qualify for a bank loan (the 'but for' test in action) - just to name two deviations from the mundane 'street improvements' meme.
The process certainly can be abused. Some communities have overused the tool, expanding it far beyond what is necessary to promote development. If an area's tax revenue is frozen for too long, schools, transit and other public needs can suffer. 
This is exactly what is going on with the downtown TIF - not just 'some communities' - OUR community.
Further development of Mass Ave and other areas in and near Downtown is needed to attract new residents, who in turn will increase the city's income and sales tax revenues. Those taxes are even more important for cities now that Indiana has capped property tax rates.
Further development of any area of our City will benefit us all.  Why does this area need any government subsidies to develop?  Isn't the free market already attracted to the area?  The Star has provided no justification for any public financing, much less TIF financing.  What is worse, the Ballard administration has provided no justification for any public financing in this area, much less TIF financing.
It's important for Mass Ave, the rest of Downtown and the entire city that the proposed developments be allowed to move forward without further delay.
Actually - NO.  Its important for the entire city that the proposal for any new TIF be clearly substantiated as to why this TIF - why this place - why this footprint - why this project before it is approved.  It is not asking much of our City officials to consider facts; not myths.  The recommendations of the TIF Study Commission need to move forward through the Council and the MDC with all haste, yes.  But any new TIF should wait until the criteria for approval are in place.

It is long past time that we stop relying on the old, untrue promises of TIFs and set up solid criteria for evaluation and monitoring of TIFs in Indianapolis.  The Star Editorial Board should insist on such things, instead of using the fourth estate to help muscle through what amounts to buying a pig in a poke.


Crossed said...

If the Mayor closes The Project School, watch who gets to redevelop that land. Its right in the middle of the Smart Growth Project and the 16th/Monon Redevelopment District.

Jon said...

HEI, is it possible to find out the total indebtedness for all TIFs in Marion County?

Had Enough Indy? said...

Jon - according to data provided to the TIF Study Commission by the Bond Bank, the year end 2011 total debt for the Indy TIFS was $844,853,000. No information was given for the TIFs in the excluded cities.

Anonymous said...

Suffice it to say, even our holy downtown TIF has 5 of 8 districts whose base has dropped to ZERO.

Even I am shocked by that fact - Is it really legal to do so? Was there a change in the laws over the last few decades because if not, the lie about the base is the most egregious lie of all that the thieves perpetuate.

As for the Star; they have no problem with stealing, as long as it involves the elite

Had Enough Indy? said...

Anon 3:11 - there is an annual form that is filled out by the Auditor and sent to the Dept. of Local Government Finance, that determines whether the revenue expected for the coming year is equal to, or more than, the previous year's revenue from that TIF district. If it is not, and there is still any base left, the base is eroded enough to capture the same amount as the past year did.

Yes - it is one of the two big lies about TIF districts -- that the base will continue to contribute the same taxes to the schools, library, townships, and IndyGo -- and --- that someday we will all benefit from the taxes produced through the catalytic effect of the TIF.

Had Enough Indy? said...

I should add that this form filed every year for each TIF district does not raise the base if the amount of revenue expected for the coming year is MORE than the current year or even MORE than is needed to cover payment on outstanding bonds.