Update on SB 188 and Its Applicability to Marion County

Last week I noted some of the exciting changes the Legislature enacted through SB 118.  Well, an alert reader gave me a heads up that the bill did not apply to Marion County insofar as giving the City-County Council the authority to review the annual budget of the Metropolitan Development Commission.   I dug down into the Indian Code and verified that the alert reader was in fact correct and my previous depiction was incorrect.

I will go back and edit the old entry.  Not wanting to leave a false impression with those of you who read that entry already, I am going to recap the highlights and note whether the item applies to all of Indiana's redevelopment commissions, or to all but the MDC and Marion County.

1) Establishment of a sunset date for all old TIFs that do not now have an expiration date:  As noted, the consolidated downtown TIF is the only set of old TIFs in Indiana that will not have to have a sunset date created.  The date sunset date for the rest will be the later of June 30, 2025, or the last scheduled payment of outstanding bonds secured with that TIFs revenue.

2) Marion County will be the only County where the legislative body will not review the budget of that County's redevelopment commission (assuming any particular County has one).

3) In all Counties except Marion, the legislative body will review all property purchases either over 3 years in term or $5 M in cost.  Our City-County Council gets to review the property purchases of the MDC if the repayment of the debt for the purchase takes more than 5 years.

4) The MDC already must have the approval of the City-County Council in order to issue bonds.  While the Code does not specify that the Council can make changes to the term, interest rate, provision for early payment or collateralized interest, the Council certainly can withhold its approval for any of those reasons.  The other Counties get this legislative approval requirement placed on the issuance of bonds by their redevelopment commissions.

5) All County's legislative bodies get to approve, and adjust if it suits them, the annual determination of how much TIF increment will pass through to the other taxing units, once the expected revenue exceeds twice what is required to make the schedule debt payments and cover expected pay as you go projects for the coming year.

6) All Counties' redevelopment commissions, including the MDC, will have to show that any new tax revenues generated by the creation of a new TIF or expansion of an old TIF, would not have been generated except for the creation or expansion of the TIF.  It cannot be a simple claim; there must be supporting evidence.

So, the busy lobbyists for Mayor Ballard/Vaughn kept some of the changes from impacting their coveted slush funds.  Luckily for us, there still are important changes coming to Marion County, as well as the rest of Indiana's Counties.

Important TIF Changes Make It Into Law

I'm really late to this news, but thanks to Thomas Heller out of Columbus, IN, I do finally have it.

This past Legislative Session actually took a couple of significant steps to reign in how TIF (tax increment finance) districts are operated.

HB 1116 made it into law with a litany of changes to the way a wide variety of governmental units manage the revenues they garner from property taxes.  From libraries to townships to school districts to municipal governments and more - there's something for everyone in this bill.

Winnowing it down to factors relevant to TIF districts we end up with three items:

It requires the MDC to submit an annual report to the Council and for the Council to forward that information to the State.

It revamps the way the value of the base is calculated each year; limiting any decrease in the value of the base to that caused by lower property values.

It calls for the Legislative Council to set up a study committee on TIFs. 

A reminder on the jargon - the base is supposedly set on day 1 of the life of a TIF district and is the total value of all property then existing within the footprint of the TIF district.  The fairytale always told is that that value will remain in the base and the taxes derived from it will always and forever flow to the schools and libraries and cities and towns.  The increment is supposed to be all the growth in value due to new construction and redevelopment (not just inflation).

The reality is that each year, the County Auditor must submit to the State Department of Local Government Finance, a form for each and every TIF district that recalculates the base.  We have seen considerable erosion of the base of our TIF districts in Marion County over the years due to the calculations handled on these forms (TIF neutralization forms), with base value being converted forever into increment value.   Such is our problem here in Marion County, that 16 of our 40 TIFs have seen their base drop to zero, including 5 of 6 components of the much vaunted consolidated downtown TIF.

In trying to recreate how the TIF portions of this bill flowed through the session, it seems the introduced bill included only the method for the annual recalculation of the base (TIF neutralization in TIF-speak).   At some point after it got to the Senate, this part was deleted.  During the Conference Committee, it was added back and the other two items (MDC report to Council requirement and call for a study committee) were added new.

The MDC (our redevelopment commission) must submit a report to the Council by August 1 each year.  The report must include revenues received, expenses paid, fund balances, the amount and maturity dates for all bonds, and the amount paid on bonds for each TIF district.  Also, a list of all parcels included in each TIF district along with the base value and increment value for each parcel.  The Council has until October 1 to compile the information and submit it to the DLGF.

This would, of course, open all of this information up to the general public as well.

According to the Legislative Services Agency, who evaluate every bill for its fiscal impact, the current law requires the MDC to submit a more abbreviated report to the Mayor each year.  I'm sure he reads it, too.

Because of HB 1116, the law now protects the base from any erosion, except when the assessed value of the property in the TIF district decreases - as in an either local or widespread recession.  This reasserts the promise made when TIFs are created.  In non-recession times, the base would grow along with the value of the property as determined by the County Assessor.  As the LSA puts it, increased base values "would result in lower tax rates and potentially lower circuit breaker losses" to schools, libraries and city governments.  I've noted before that half of all circuit breaker losses can be directly attributed to our TIF districts.

One unfortunate aspect of this change, is that those TIF districts whose base have already dropped to zero will never see the benefit of the new law.  But, it is good that at least one of the fairy tales used to sell the public on a TIF will be made reality, finally.

 

And last but not least, the study of TIFs at the state level is long overdue.  There is so much hocus pocus and shenanigans going on with TIFs that overhaul is needed in order to protect the public.  While I'm usually more apt to back home rule, the actions of our city fathers and mothers to dismantle and ignore the recommendations of our own TIF Study Commission shows how little we can trust them to move forward in the public interest, over the interests of select individuals.

The state enabled TIFs decades ago. Slowly, as problems have come to their attention, they have enacted changes to the law to reign in bad practices. Maybe a decade ago, after seeing abuse of the bonds tied to TIFs, they said that any bond paid with property taxes could be refinanced only if the term was not lengthened nor the payment increased. Last year they limited the life of any newly created TIF district to 25 years. And this year, they stepped forward to protect the base. Now, if only they could turn their attention to limiting the fraction of property value that can be caught up in TIFs, and forcing the sunsetting of existing TIFs once their current bonds are paid off...

SB 621 - Additional Changes, and, Interesting Questions Arise About the MDC

SB 621, which tries to extend the life of Republican rule over Marion County, has passed out of the Conference Committee changed from the form it had when entering that body.  The body itself was changed, substituting Republican Senator Waltz for Democrat Senator Breaux, and Republican Representative Speedy for Democrat Representative Bartlett.  Having shed any semblance of bipartisanship, the all Republican group passed their version of a 'compromise' piece of legislation.

All sections of the bill now clearly apply only to Marion County.  As we all expected, the 4 At-Large Council seats are again to be eliminated.  The Controller can now 'only' change the budgets of all Departments and Offices if the revenues drop from the levels expected when the budget was passed and 'only' twice a year.  The County Commissioners still lose their two appointees to the Metropolitan Development Commission, but one is shifted to the Mayor and one to the Council, giving the Mayor 5 and the Council 4 appointments.  Lake and Allen Counties are struck from the burden of having to count all absentee ballots at a central location - now only Marion County must do so.  And, Marion County's Township Boards drop from 7 members to 5 at the next election.

Interestingly enough is the question of when the MDC appointments shift.  According to state law, the term of these appointments may be from 1 to 3 years, as determined by the appointing body.  Here is the law, with the MDC portion highlighted:

IC 36-7-4-218
Membership of commission; terms and removal of citizen members
Sec. 218. (a) When an initial term of office of a citizen member expires, each new appointment of a citizen member is:
(1) for a term of four (4) years (in the case of a municipal, county, or area plan commission);
(2) for a term of three (3) years (in the case of a metropolitan plan commission); or
(3) for a term of one (1), two (2), or three (3) years, as designated by the appointing authority (in the case of the metropolitan development commission). 

A member serves until his successor is appointed and qualified. A member is eligible for reappointment.

So, one outstanding question is, when the Marion County Commissioners appointed Cornelius Brown and Ed Mahern, for what term did they appoint them?

The new section regarding the appointing bodies takes effect on July 1, 2013.  But at what time would the Mayor and the Council get to begin taking over those two appointments?

The shift of MDC appointments has always been the worst of the Republican power grab, and will leave Indianapolis and it Citizens even more at the mercy of Mayor Vaughn and his rapacious appetite for giving away taxpayer money to favored developers, regardless of how many employee contracts he has to gut or how many cops and firefighters he has to lay off to afford doing so.

At-Larges Back On the Chopping Block -- the Beat Goes On

This is what you get when parties are more important than honest government set up for the benefit of the people.  In this case, it is the Republican version of how that party would like to operate government - by itself.

The Indiana Legislature is overwhelmingly Republican at this point.  During much of recent history they have been mostly Republican in the Senate and see sawing with Democrats for the majority in the House.

What happens when you want Republican control ensconced in Uni-Gov?  You create 4 At-Large positions to ensure that Republicans will enjoy the majority in the Council.  The County wide elections for all other offices ensure Rs will control all divisions of Indianapolis for generations.

What happens when a Republican Mayor of Indianapolis simply doesn't pay into the police and fire pensions that are still the City's obligation?  Nothing.

Then what happens when a Democrat Mayor of Indianapolis faces having to pay the promised retirement money due to actual retirees, and the money is not there in the pension fund?  Nothing.  At first.  Then, the Legislature tells him he can raise taxes.

When raising taxes sinks that Democrat Mayor and he is followed by the accidental and now ceremonial Republican Mayor who bumbles in his testimony before the Legislature, what happens?  The Legislature take the pension obligation off his hands and let him keep the tax increase anyway.

What happens when a lawyer turned Councillor turned lobbyist finally morphs into Chief of staff/non-ceremonial Mayor?  That's when all the mean spirited, mud wallowing, take no prisoners stuff hits the fan.  That's when the budgets of duly elected Democrat officeholders are slashed in a blackmail bid.  That's when passing two tax increases must include 8 Democrat Councillors, and not just enough to gain a majority on top of all Republicans voting in favor.  That's when 'cooperation' turns into capitulation.

The Democrats on the Council (with a couple of exceptions) have done little except capitulate.  They and their Republican brethren have not been very interested in securing and protecting the role of the Council as a body independent of the Mayor's office.

So, now we see the logical extension of a power grab that has been operating for some time.  Get rid of the 4 Council At-Large positions, now likely to remain Democrat, and hope you can still manage to get a slight majority of Republicans to again win the 25 District seats come 2015.  Get rid of the County Commissioners', now likely to remain Democrat, appointments to the MDC and hand them to the Mayor.  'Allow' the Council to consolidate the Sheriff's Department, now likely to remain in Democrat hands, with IMPD and put it under the Mayor.  If revenues dip, allow the Controller, under the Mayor, to cut any budget he likes in order to match revenues with expenses - without going back through the Council, which heretofore was the fiscal body of the City.

The bill, SB 621, passed both chambers and now is in Conference Committee to work out differences in the versions passed.  IndyStar Legislative beat reporter, Mary Beth Schneider, tells us how things went in that Committee.

When the bill was heard earlier in the session, lawmakers heard from dozens of people opposing the bill, including one GOP councilwoman, Christine Scales. Only two people spoke in favor of it: Joe Loftus, the lobbyist for Indianapolis Mayor Greg Ballard, and Rep. Mike Speedy, an Indianapolis Republican who formerly served on the City-County Council.

Republicans used a joint House-Senate conference committee to try to erase any impression that there is little support for the plan. In a hearing that lasted six hours, other Republican members of the council, including Janice McHenry and Will Gooden, indicated at-large council members are anonymous at best and meddlesome at worst.

They brought in the star-studded duo of Republican Councillors Holden and McHenry (Gooden appointed to replace Ryan Vaughn on the Council a year ago, and McHenry who always sides with the Republican party) to testify against the At-Large positions.  Councillor Shreve would be the only Republican Councillor they could choose who might have less gravitas than these two.  No doubt Gooden and McHenry's oratory and logic were stunning, because the At-Larges are back on the chopping block.  Personally, I suspect it has less to do with purported anonymity and meddlesomeness, than simply because those offices are held by Democrats and that is inconvenient to the Republican Party.

The two Democrats on the Conference Committee say they will not vote in favor of this version of SB 621.  Interestingly, in a game of chess way, Conference Committees have no majority party.  Two Senators, one of each party, and two Representatives, one of each party, compose these committees.  Obstinate appointees can be replaced.  In this case, obstinate Ds can be replaced by cooperative Rs, who are in abundance in both chambers.  No telling if swaps will be made.  And, there is no telling if the revised version that comes out of the Conference Committee will pass both chambers in that new form.

This Legislative session is drawing to a close; with April 29 being the last day it can adjourn.  So the current heavy handed Republican reach into Indy's governance will soon end.  But, do not expect this to be the last chapter; it wasn't the first, second, third or fourth chapter.

How Bills Are Really Made

BTW - ALEC has special status under Indiana law - Legislators can take unlimited gifts, trips, and 'assistance' from ALEC and they do not have to report dime one or dollar one-hundred-thousand.