Excellent !

Rarely do I read an article in the IBJ about TIF Districts and say to myself, "Excellent" !

Well, that's not entirely true.  I never have.  Until today.

IBJ reporter, Francesca Jarosz, reports in today's edition, that City officials are looking at creating rules to return excess TIF funds back to the base taxing units, like the Library and schools.  If you don't have a subscription to the IBJ, you might be able to track them down at your local Library branch.  IBJ has become a must read for me.

In her article "Indianapolis eyes TIF surplus to shore up city coffers", Jarosz reports:

The city is considering ways to channel money captured for economic development in some of its 22 tax-increment-financing districts to units such as libraries and city-county government.


City financial officials and consultants are evaluating whether they can afford to shift some of the property taxes within the TIF districts back to the general tax base. They must make a determination by the end of this month.

City-County Council leaders also plan in the next month to start a public discussion on how to craft guidelines for using TIF in ways that maximize revenue for basic city services.

Excellent!

Jarosz even quotes Ryan Vaughn, President of the City-Council, as saying:

“We have property-tax caps in place now and reduced income-tax revenues,” said Ryan Vaughn, the council’s Republican president. “We have to start releasing some of the money back to the base when the district starts to over-perform.”

Excellent !

Jarosz also reached out to experts outside of Indiana:

“If you’re diverting that much money, it’s going to have an impact on the budget,” said Thomas Cafcas, a researcher with Washington, D.C.-based Good Jobs First, which advocates making communities more accountable for economic development incentives. “If money is just sitting there, it should be returned rightfully to other taxing jurisdictions.”

Gonna hafta Google Cafcas....


But, what can I say, except, Excellent !  Bring on that community conversation !

Excellent !!!!!!!

Request for Information From You, My Valued Reader

I am still as stunned and appalled as when I read yesterday, that the Ballard administration decided to "forgo collecting business personal property taxes" from the consolidated downtown TIF area - both this year and next.  (quote from IBJ's Francesca Jarosz article "Bush fixup fans tax tensions".)

I want to know - Who has the authority to decide to forgo any taxes from anybody?  Under what legal mechanism can you fairly and justly collect a tax from one person or business, and not collect it from their neighbor or another taxpayer in your jurisdiction?  Has this been done before?  Did the Ballard administration decide to forgo taxes that should have gone to IPS, IFD, IMCPL, IndyGo, and IndyParks as well as taxes that flow to the TIF district fund?

Here's where you come in.  I do not know who has the authority to do such things.  Therefore, I don't know where to send an open records request.  I figure one of my valued readers does know.  So, please leave a note in the comments section to help me find answers.

Remember, they chose to "forgo" property tax revenues at the same time that there was much gnashing of teeth about property tax caps.  They will be crying in their soup about it yet again when budget time commences formally in August.  Help me get some answers about this issue before then.

Thanks.

Are They Insane, Stupid, or Totally Corrupt? Had Enough Indy ?

I just got home from doing my grocery shopping and got my copy of the IBJ out of my mailbox. 

I saw the front page article by reporter Francesca Jarosz entitled "Bush fixup fans tax tensions". As I read, my response morphed from annoyance, to disgust, to horror at the Ballard administration's abject lack of fiscal responsibility.

Jarosz reports that the Ballard administration intends on pilfering money from the Consolidated Downtown TIF district to pay $3.5 million of the $5 million it promised the redeveloper of old Bush Stadium.  They intend on doing this, even though the TIF laws require that the property tax money collected from a TIF can only be used within that district or CONTIGUOUS WITH IT [IC 36-7-15.1-26(b)(2)(G)"that are physically located in or physically connected to that allocation area"].  Bush Stadium is nowhere near the Consolidated  Downtown TIF district.

It gets worse.

Jarosz also reports that Ballard and his crew decided not to collect business personal property taxes AT ALL from the businesses in that TIF district this year AND next.  When was that decided and when was that public hearing held?  I know I would have shown up for that doozy. 

Jarosz quotes some good sources who are sane. 

“It’s at the expense of other units of government,” said Fred L. Armstrong, who was instrumental in creating the original downtown TIF as city controller for two decades and now consults with Indy Go on financial matters. “You’ve got to take care of your current problems before you create new ones.”

and

“When we consider the never-ending uses for the downtown TIF dollars, it kind of looks a little slush-fund-like,” said Brian Mahern, a City-County Council Democrat who has been a vocal critic of the city’s economic development policies.

and

Indianapolis leaders don’t provide that kind of specificity in the Bush Stadium case, he [Bruce Frankel, a professor of urban planning at Ball State University] said. 

“Any project you can dream of probably has some general benefit to the downtown—or even the city—as a whole,” Frankel said. “The law was written for a purpose—it’s supposed to be targeted geographically.”

Remember when Ballard and his people said the City could not legally take $8 million from the Consolidated Downtown TIF and buy new parking meters and keep all future revenue as an asset for future generations?  Remember when Ballard and his people said the City could not take $2 million from the Consolidated Downtown TIF and help the Library get through a tough economy? 

Remember when Ballard and his people gave $8 million A YEAR to the Pacers from the Consolidated Downtown TIF (laundering it through the CIB and ICVA)?  Remember when Ballard and his people floated $98 million in new bonds in the Consolidated Downtown TIF to give a loan to a well connected developer for the North of South project?

What is the thread of real logic being used in all of these cases?  It is not what is legal to do with the TIF revenues.  It is not what is fiscally responsible to do with the TIF revenues.  It is not what will improve the quality of life for those of use who live in Indianapolis.

The only thread of real logic being used is how can we rob the Consolidated Downtown TIF of all of its funds to benefit well connected fat cats?

The sidebar to Jarosz' article says that the City has tapped the Consolidated Downtown TIF district for $24 million over the last year.  It includes $3.5 million in renovations for City Market, $600,000 for the 4th spoke of the ArtsGarden, $8 million to the ICVA (really the money laundering for the Pacers I noted above), and $9 million in infrastructure improvements for the North of South Project.  I'd also have to include the $98 million in bonds floated for the North of South Project, but the sidebar does not.

The Ballard administration is either determined to spend every last dime that the City either has or can borrow, and leave enormous debt for all the future Mayors and taxpayers to contend with - or they don't know what they are doing.  Either way, this City will face a very rocky future because of all the debt the Ballard administration is creating and how little existing debt it is paying off.

Had Enough Indy?

Games with COIT, LOIT, PST and Library Funding

I don't know what actually takes more slight of hand, the movement of dollars from one fund to another that are said not to be possible, or the explanation of why it can't be done in similar situations.  Fully funding the Indianapolis-Marion County Public Library is a prime example of this slight of hand.

Just last year, the City-County Council filled $1.0 million of a $1.8 million shortfall, with money laundered from the Ameriplex TIF District - money that had been sitting in the TIF District fund to act as a reserve to satisfy bond holders.  At the time, Councillors like President Ryan Vaughn, stated that they could not cover the remainder of the Library's shortfall with money from the Consolidated Downtown TIF District, even though it was exactly the same type of situation and even though they had just managed to pull $8 million a year from that TIF to pay more money to the Pacers.

Earlier this year, with much show and fanfare, the Council passed a resolution urging the Indiana State Legislature to grant them the power to send some County Option Income Tax revenues to the Library in future years.  The Legislature indicated that the City already had that power, but reaffirmed it with new legislation.  Now that the City and the Council has that power, Councillor Vaughn and others are making noises that indicate they will not split the COIT revenue with the Library anyway.

IBJ reporter, Francesca Jarosz, has a good article in the current IBJ that goes into the COIT - Library - IndyGo funding issue pretty well.  I agree with Councillor Jackie Nytes' position, captured in the final two paragraphs of the piece:

Jackie Nytes, a council Democrat, said giving the library even a small share of income taxes this year is important in setting a precedent.


“We recognize there is a need as a show of faith to find a way to begin that sharing of income taxes,” Nytes said, “even if the initial allocation may be more symbolic than substantive.”

I decided to look at the 2011 City-County budget to see where the City and County income tax money was going, just to see what I found.  I looked at the budget breakdown "2011 Council Adopted Revenues by Subobject by Fund" and "2011 Council Adopted Revenues by Fund by Subobject".  Click here for page with links to a variety of ways to dissect the budget.
 
But, first, a step back to explain that there are three separate taxes revenue streams that combine to total all of the income tax collected in Marion County.  There is the County Option Income Tax (COIT).  There is the Local Option Income Tax Property Tax Make Up (LOIT).  There is the Public Safety Option Income Tax (PST).  Some will tell you that the PST is dedicated to public safety an cannot under any circumstances be used for anything else.  But, that is not the case and in 2010 it was in fact redirected for use anywhere on anything to benefit the final City-County budget both in 2010 and in 2011.
 
In 2010, $21.1 m of COIT money and $13.3 m of PST money were put into the County Rainy Day Fund, where they were essentially laundered so that they could be used for any expense.  $17.3 m was transferred out that year and $17.5 m transferred out to benefit the entire budget.
 
So, for just 2011, how is COIT, LOIT, and PST being spent?
 
COIT:
Fire fund -- $40.4 m
IMPD fund -- $79.2 m
County General Fund -- $6.4 m
MECA fund -- $6.8 m
 
LOIT:
Consolidated County fund -- $2.6 m
Parks fund -- $2.1 m
Redevelopment fund -- $55 k
Solid Waste Collection fund -- $3.1 m
Fire fund -- $8.8 m
IMPD Fund -- $4.8 m
County General Fund -- $13.9 m
 
PST:
Public Safety Income Tax fund (from City's take of PST) -- $29.9 m 
Public Safety Income Tax fund (from County's take of PST) -- $20.6 m
 
These funds are then the sources of money that go into each departmental budget.  The grand total of income tax revenues for the City-County in 2011 comes to $218 million.  Surely the Library is important enough to the powers that be, regardless of party, to send less than 1% of the income tax revenue to help make Indianapolis a great place to live.
 
But, somehow I expect there will be more slight of hand trying to explain why COIT, LOIT, and PST cannot be shared with the Library than prestidigitation in making it happen.

What If You Were Mayor?

What if you were Mayor of Indianapolis? What would you promote as the City's abatement policy?

There is an opening in the public dialog to discuss this economic development tool, thanks to a curious abatement situation recently reported on by IBJ reporter, Francesca Jarosz. In a new article entitled "Tax breaks for Rolls-Royce hinge on investment, not jobs" (sorry, the article is open only to online subscribers), Jarosz reports that the Ballard administration has agreed to two property tax abatements for Rolls-Royce. One would be a $1.2 million, 10-year abatement for the company to remodel the downtown Faris building, recently vacated by Eli Lilly. The second would be a $21 million, 10-year abatement for the company's $190 million update of two plants between Tibbs and Kentucky Avenue.

I was interviewed by Jarosz for this article and she passed on that Rolls-Royce has not actually applied for either abatement as yet. So, the approval process is in very early stages.

Over at Advance Indiana, Gary Welsh has made a couple of excellent points; that this is more of the pay-to-play relationship businesses have with the Ballard administration, and that once the Mayor decides his position on an abatement, the rest of the process is just rubber stamping by the Metropolitan Development Commission and the City-County Council. I can't really argue against those positions. If pay-to-play rumors are even 10% true, the Marion County Prosecutor or the FBI should investigate, prosecute, and jail those who are involved. As for a mutant public process, I am all for a more transparent, more responsive, and more accountable system than the one we currently 'enjoy'.

For my purposes here, I'd just like to get a little community dialog going about abatements, using the proposed Rolls-Royce abatements simply as a complicated, real life example.

So, you be the Mayor. Where do you stand on abatements?

Abatements are allowed by state law for any project that will bring an investment in buildings and/or secure new jobs. The company who is awarded an abatement, pays only about half of all new property taxes that result from their investment. An abatement is granted anywhere from 3 to 10 years. The practice in Indianapolis has been to enter into a contract whereby the company agrees to invest an agreed upon amount of money in new facilities, or upgrades of current facilities, and produce an agreed upon number of new jobs, in return for the abated taxes. This is called the "clawback clause". If the company fails to invest the money or produce the new jobs, the City can ask for the company to repay the taxes as a penalty.

As Jarosz points out in this article, 69 of the 80 abatements granted over the last 3 years have included increased job numbers as part of the agreement. Still, that means that nearly 14% have not included additional jobs.

So, if you were the Mayor of Indianapolis, what would you do? Would you allow any abatements?

Surrounding counties have been particularly aggressive with providing abatements to companies considering locating there. So, there is a regional competition for jobs and future taxes from companies choosing what central Indiana city to call home. Then there are the really big companies who can locate anywhere in the US or overseas. Would abatements be part of your approach to attracting new businesses to Indy?

If you, as Mayor, are open to abatements, then under what conditions would you support one?

Is it a certain type of business? In the past, just for examples, abatements have been granted to retailers like Kroger, hotels (with the condos atop the Conrad also being granted abatements), some housing stock, and industrial businesses.

How do you, as Mayor, balance the need of a company like Rolls-Royce, to make significant improvements in their plants in order to modernize them - but not to produce more jobs. If a major employer, like Rolls-Royce, is looking at two aged plants and has $190 million to spend, they have options to move to a new location and build new, or remain and update the existing plants. Should your City grant an abatement, even though no extra jobs will be created? I think the two proposed abatements for Rolls-Royce actually represent the spectrum of upgrades. In the smaller Faris deal, there is remodeling of an office building, presumably for layout and not modernization. Should your City grant an abatement for a company, even a major employer, to simply remodel a building? Should your City grant abatements for any company to locate downtown? Should your City grant an abatement for a major updating of an aging plant, in order to keep the major employer in your City?

There is no doubt that companies view abatements as routine anymore. If they can save millions of dollars in taxes, they are surely going to do so. So, one cannot be sure of the accuracy of any threat to relocate a business should an application for an abatement not be granted.

Would you as Mayor create a public list of what sorts of investments or job creation numbers will automatically result in an abatement?

Tax abatements are a fact of life, for sure. That does not make every one wise, nor every one foolhardy.

If you were Mayor, what role would property tax abatements play in your efforts to increase economic development and job creation?