TIFs - 2013 Legislative Changes Protect the Base & the Curious Case of the North Midtown TIF [corrected]

It has taken me a while, but I finally sat down with the forms filled out last August by the Marion County Auditor's Office, that evaluate the amount of base and increment in each TIF district we have.  These are the annual TIF neutralization forms that I've brought up before in this blog.

The forms for 2013 (pay 2014) are different than those used in previous years.  That is because of changes made just last year by the Legislature to reign in unsound practices that led to the base being eroded each year.  Now it is the actual aim of the form to let the base rise and fall due to changing market values, not due to the amount of tax money the increment took in the previous year.

As a reminder, each TIF district has its Assessed Value split between the base and the increment.  The base is supposed to be the value of the property before the TIF was created, and the increment is the new value supposedly created by the establishment of the TIF.  The taxes that flow from the base are always promised to continue flowing to the schools, city, etc., but we know full well that that promise was not an honest promise - until the 2013 changes were forced by the Statehouse.

Instead of getting to far into the weeds, let me just summarize by saying that the new forms ask how much new construction happened and allots that value to the increment, how much was demolished and allots that value proportionately to both the increment and the base, and, interestingly enough, how much value rolled off from abatements that year and allots it to the increment.  It takes any other increase or decrease in the AV, presumably due to actual rising or falling market values, and allots that proportionately to the base and increment.

In the big view, this change appears to be successful.  I had to make an adjustment for the new North Midtown TIF's inclusion for the first time this year - which was easy enough.  I would have done so for the new Bush Stadium Area and Mass Ave TIFs from 2012-13, but the component TIFs of the Consolidated Downtown TIF are no longer itemized.  Rather, the Downtown TIF and its 10 components are now reported as one set of numbers, as is the Consolidated Airport TIF and its 7 components. 

In the 2011 (pay 2012) TIF summary provided to the TIF Study Commission, the value of the base for all TIF Districts in Marion County was reported as $2.02 Billion.  By the next year, the base had been eroded substantially; in 2012 (pay 2013) the total base AV fell to $1.47 Billion - losing a quarter of its value as half a billion dollars was pushed into the TIF increment.  The latest figures for 2013 (pay 2014), show a stabilized base AV, coming in at $1.47 B, once again (after subtracting the new North Midtown TIF).

Half the TIFs lost value and half gained between 2012 and 2013, with a net growth of $170 M for a total TIF District (base plus increment) value of $5.83 B.  The Downtown TIF accounts for just over half the value of all TIFs in the County, but its growth accounted for the lion's share of the Countywide TIF increment value, adding $149 M.

The State Legislative Services Agency puts together annual reports on the impact of the tax caps.  In 2012, the LSA reported that Marion County TIFs collected $99 M in property taxes.  By 2013, that figure rose to $108 M.  The projected TIF revenue to be collected this year is $118 M.  The Downtown TIF is the big winner, with a projected revenue of $68 M.

The North Midtown TIF was established early last year, so this was the first time the base and increment were evaluated through the annual TIF neutralization process.  The form (p. 7 of the pdf) reports that there was no new construction, $286,300 worth of demolition, and $755,960 in previously abated property coming off the tax rolls.  You'd think that since there was no new construction, the base would continue to be 100% of the entire TIF AV. 

Nope. 

The abatements granted before the TIF was established are now generous donors to the increment.  The increment went from 0 to $469,707, in a year that saw no growth truly attributable to the creation of the TIF.  Since abatements tend to run 10 years and fall off the same fraction each year, one can guesstimate that the old abatements could award the North Midtown TIF about $4 Million over the next decade.  Not bad for just starting a TIF and having no new dollar investments to claim as having been caused by the TIF.  [These are the corrected numbers.  As Anon 10:50 pointed out, I had the incorrect order of magnitude previously.  I apologize for the added drama.]

I await brand new legislation regarding TIFs to get signed by Governor Pence.  I'll report within a couple of days some exciting new Legislative endevors to reign in rampant abuse of TIFs, especially here in Marion County.  They did a good thing last year, by solidifying the TIF base, so that at least one of the promises made when TIFs get created is a promise that stands a chance to be fulfilled.  The North Midtown TIF shows that the revamped system is not perfect, but much improved over the old way.  One step at a time.  One step at a time.

Reflections on Mid-North TIF Hearing Last Week - clip 2 included

continuing to post the various clips from the MDC hearing on the Mid-North TIF

Bruce Donaldson's take on what can happen to the base:

Reflections on Mid-North TIF Hearing Last Week - clip 1 included

I have a few thoughts lingering after last week's MDC hearing on the North Midtown TIF.  Of course, it went through with a 7-1 vote (Ed Mahern being the lone no vote).  But, there were some interesting points made that are worth noting.  You will see how the fairy tales about TIFs continue to be repeated - to folks charged with deciding whether or not to create them by folks considered experts.

First, let me say how outstanding it has been to work in concert with the good folks from Meridian Kessler Neighbors Helping Neighbors.  These folks (Clarke Kahlo, Paula Light, Ellen Antoniades, Terry Sanderson, and Doug Sherow) understand the connection between TIF proliferation and cutbacks in funding for basic services like police, fire, and schools.  They know the Meridian Kessler does not want for much, and presented the facts and figures that clearly demonstrated that the northern half of the North Midtown TIF should be removed from any consideration of a TIF.

Of concern is the fact that the only representatives of the City, who were in fact consultants, did not understand the wider view of TIFs beyond their particular focus of expertise.  I refer to Barnes & Thornburg attorney, Bruce Donaldson, and Crowe Horwath's Angela Steeno. 

Donaldson evidently writes up the documents that lead to the creation of  TIF districts, and likely does a masterful job with that.  Yet, when asked about erosion of the base by turning it into TIF increment, he was way off the mark.  He relayed to the Commissioners the mistaken impression that the annual filing by the County Auditor of a form known as the "TIF neutralization" form, only causes the base to float up and down with normal fluxuations of assessed values.  His lack of understanding of the actual effect of these forms is damaging.  He helps perpetuate the fairy tale that the tax dollars flowing from a TIF district the day before the TIF is created, will always flow to fund the schools and police, etc.  He had not heard anything about nearly half a billion dollars of base being converted into increment this past year.  (see "TIF Fact #2 --- $490 million of property value was transferred from the base to the increment this year" and click here to review the forms for yourself [edited to add - line 7 reports the old base assessed value and line 13a the new base AV determined through the form]).  I was given a few minutes to respond to his error.  Hopefully, the Commissioners will follow up on this matter with Deron Kintner so that they are fully informed on how this aspect of TIF districts actually functions.

One brief comment by Donaldson surely sent a chill up the spines of many of the proponents.  He told the Commission that they didn't have to do any projects in Broad Ripple (as a for instance) if they didn't want to.  They could, instead, use TIF revenue from Broad Ripple to fund projects in other parts of the district.

Steeno had a couple of interesting moments.  Her focus was on the impact of the Broad Ripple parking garage (that was paid for with $6.34 million of taxpayer dollars) on the amount of tax revenue that could be generated, the amount of bonds that revenue could secure, and the effect of its inclusion in the increment on the circuit breaker penalties tied intimately with TIFs due to the property tax caps.  She seemed unaware that the owners of the garage could appeal an assessment using the cost to build, by arguing that the cash it generates should instead for the assessment - and leading to a lower assessed value than she was predicting. 

More importantly are two numbers she reported, but failed to link together.  She stated that the garage should generate $317,000 a year in property tax revenue to the TIF.  She also stated that the garage would cause "only" about $200,000 a year in circuit breaker penalties throughout the County. 

This is important as it predicts the minimum effect of this TIF on cuts in property taxes that our various governmental units qualify for, but cannot collect due to property tax caps.

The minimum effect is that for every dollar generated in the North Midtown TIF district, circuit breaker penalties will rise by 63 cents.  That's pretty substantial.  So, if the TIF generates $10 million, expect penalties to rise by $6.3 million a year.  That's $6.3 million less in services - from schools, to the Library, to IndyGo, to police, and to fire - and more.

The failure of those in control of the money in our City to come to terms with the reality of how TIFs really operate, is likely to haunt our community for at least one more generation.  It is curious indeed, that those who promoted this TIF because of executives fleeing our more affluent Marion County neighborhoods, have likely exacerbated the underlying reason.  The reason families flee the county is not for a lack of commercial development, it is often because of the lack of good quality schools. Inappropriate TIF districts make the problem worse for schools, not better.

I am having technical problems loading more than one clip from the hearing.  I will attempt to added the other clips to subsequent posts.   You can view the entire hearing by clicking here.

Meridian Kessler Neighbors Helping Neighbors comments, plus my own.

 

Increased Ticket and Car Rental Taxes, Mid-North TIF and Charter Schools - How They Voted

Last night the City-County Council voted to raise the admissions tax from 6 to 10% (Prop 23) and the car rental tax from 4 to 6% (Prop 24).

Councillor Cain, a Republican, was absent.

Admissions Tax Increase --

Voting for were Democrats Barth, Brown, Hickman, Lewis, Moriarty, Osili, Robinson & Talley and Republicans Shreve, Gooden, Holliday, Hunter, Lutz, McQuillen, Miller & Pfisterer

Voting against were Democrats Adamson, Evans, Gray, Mahern, Mansfield, Mascari, Oliver & Simpson and Republicans Freeman, McHenry, Sandlin & Scales

Car Rental Tax Increase --

Voting for were Democrats Barth, Brown, Hickman, Lewis, Moriarty, Osili, Robinson & Talley and Republicans Shreve, Freeman, Gooden, Hunter, McHenry, McQuillen, Miller &  Pfisterer

Voting against were Democrats Adamson, Evans, Gray, Mahern, Mansfield, Mascari, Oliver & Simpson and Republicans Holliday, Lutz, Sandlin & Scales 

Democrats each voted the same on each tax increase.  Republicans Freeman and McHenry voted no on the ticket tax and yes on the car rental tax, while Holliday and Lutz swapped with them to vote yes on the ticket tax and no on the car rental tax increases.

In both cases there were just enough votes to pass the two tax increases.  So, the new Councillor Shreve can be said to have cast the decisive vote each time.  Shreve's qualifications to serve as a Councillor have been called into question due to residency issues. [edited to add: I've had a brain meltdown - it takes 15 votes to pass an ordinance by a simple majority, so Shreve was a cushion of one vote]

Meanwhile, Prop 291, the Mid-North TIF that adds another square mile to Indy's already burdensome TIFs saw a motion to amend and a vote.

The bright star of the Council's freshman class, Zach Adamson, introduced an amendment to exclude the Broad Ripple parking garage from the TIF.  This garage is being built with $6.4 million of taxpayer funds, which we all were told would be recouped in property tax revenues.

The vote to amend was defeated, with 6 voting yes and 22 voting no.

Those voting yes were Democrats Adamson, Brown, Evans, Mahern & Oliver and Republican Scales

Those voting no were Democrats Barth, Gray, Hickman, Lewis, Mansfield, Mascari, Moriarty, Osili, Robinson, Simpson & Talley and Republicans Shreve, Freeman, Gooden, Holliday, Hunter, Lutz, McHenry, McQuillen, Miller, Pfisterer & Sandlin 

The vote to pass the proposal garnered 23 yes votes and 5 no votes, with Evans and Oliver siding with the yes votes and Holliday moving to the no vote camp.

Those voting for the TIF were Democrats Barth, Evans, Gray, Hickman, Lewis, Mansfield, Mascari, Moriarty, Oliver, Osili, Robinson, Simpson & Talley and Republicans Shreve, Freeman, Gooden, Hunter, Lutz, McHenry, McQuillen, Miller, Pfisterer & Sandlin 

Those voting against the TIF were Democrats Adamson, Brown & Mahern and Republicans Holliday & Scales

On the 4 Charter Schools proposals, here are those voting no on each:

Prop 429 (Excel Center Lafayette Square) Democrats Evans and Oliver

Prop 430 (Indiana Math and Science Academy - South) Democrats Evans, Lewis, Oliver & Robinson

Prop 432 (VBP Indy, Inc) Democrats Evans, Lewis, Oliver & Robinson

Prop 433 (Vision Academy) Democrats Evans, Lewis, Oliver & Robinson

All other Councillors (except Cain, who was absent) voted for.

Council Meets Tonight - Hold Onto Your Wallets

The City-County Council meets tonight.  Increasing your taxes and siphoning off property taxes from known future development to pay for corporate tax handouts instead of cops, are on the agenda.

The Council will vote on raising the local car rental tax from 4 to 6% (Prop 24) and raising ticket tax from 6 to 10% (Prop 23).  They will also vote on Prop 448, which puts back the nearly $32 million Mayor Vaughn slashed from County Office 2013 budgets; a move that made no fiscal sense, just created blackmail fodder.  These are all to have public hearings, as they are fiscal ordinances.

Prop 291, the Mid-North TIF, will be voted on as well, but no public hearing is to be held.  This plan specifically removes property taxes derived from the taxpayer-funded Broad Ripple parking garage from common good uses, like paying for public safety in places like Broad Ripple, to paying for public art near Broad Ripples innumerable bars and park upgrades to Tarkington Park.  Developer driven tax handouts are anticipated within the 1 square mile of the TIF district as well.  If things go well, Mapleton-Fall Creek, an actual area of need, just may get a project financed with TIF dollars.

Among the Proposals being introduced tonight is Prop 33, sponsored by Councillors Talley and Robinson, which directs DPW to use $3 million of its 2013 RebuildIndy funds for Avondale-Meadows infrastructure improvements.  This proposal is being offered to substitute for the expansion of the Fall Creek Place TIF which proponents hoped to use to attract a grocery store.  These proponents now suggest more investments of TIF dollars were also hoped for, once the grocery was in place and the TIF fund grew.   I do not know what those projects were expected to be or if they simply expected to spend any and all TIF dollars that amassed beyond the initials needs.

Also likely making an appearance is newly selected Councillor Jefferson Shreve, whose residency qualifications for that office were called into question over the weekend.  Selected Saturday morning, questions arise, trail of documents unearthed by Saturday afternoon.  Somewhere in that time, they GOP hastily swore Shreve in.  You can read all about it on the Advance Indiana and Ogden On Politics blogs.

Most Intelligent Comments of the Night

Norman Pace, representing the Warren Township Development Association and the Marion County Alliance of Neighborhood Associations, had the most intelligent comments during last night's Metropolitan & Economic Development committee's meeting on the Mid-North TIF.  Here is the WCTY video of Pace's statement:



What's Going On With TIFs?

For the second consecutive meeting of the Metropolitan and Economic Development committee, the Mid-North TIF (prop 291) was postponed - now to November 26.  Ostensibly it was due to sponsor Councillor John Barth's drafting of an amendment, which he told a couple of us who attended the meeting, was still a concept in his head.  He did promise to have the Council office post his amendment online in advance of the November 26 in order to give the public a chance to review it prior to that meeting.

The committee also postponed to November 26, two proposals on the TIF Study Commission recommendations - Prop 274 urging the MDC to adopt those recommendations pertinent to them, and Prop 275 urging the General Assembly to adopt recommendations that fall in their wheelhouse.  Although these proposals were introduced before the Mid-North TIF proposal, this was the first time they were actually placed on a committee agenda.

Also being delayed from any actual agenda, is the reintroduced TIF proposed for the Meadows area - formerly Prop 16, declared dead when Prop 15 was not.  This is the proposed expansion of the Fall Creek TIF and now is alive as Prop 349.

The Council has 45 days to put an introduced proposal on a committee agenda, and November 26 will come in just under the wire at 42 days.

Tonight's Rules committee meeting will entertain Prop 316 for the second time.  This proposal seeks the enactment of the TIF Study Commission recommendations that the Council can do something about.  You will recall that Barth authored a poison pill amendment that would have gutted the recommendations, the last time the committee met.  (see "Dust Up For Reasons Unknown - But I Speculate Anyway") We shall see if he still tries to do so.

It is obvious that the Democratic caucus is dysfunctional when it comes to TIF policy.  That is very unfortunate for the economic health of Indianapolis going forward.  We simply cannot absorb square mile after square mile of new TIFs - ones that primarily benefit well to do areas of our City to boot - without harming all of our governmental units' ability to deliver the services we are actually paying taxes to get.

Tonight is an opportunity to return the horse to the front of the cart, and let the Council adopt the well considered recommendations for full disclosure, transparency, and accountability that the public deserves regarding TIF district establishment and maintenance. 

Matt Tully - Wrong on TIFs - Not Just Merely Wrong; Most Sincerely Wrong

There is no doubt the IndyStar columnist, Matt Tully, is a talented writer.  As a person, Tully's opinion is of no more importance than the next guy's.  As a paid opiner for the Star, with its wide reach, his opinions are amplified in the community.  With that reach, and with being a journalist, one would hope Tully would be fastidious in checking what he promotes as facts.  Unfortunately, in his column on the proposed Mid-North TIF, Tully fails the accuracy test.

Tully repeats that tired old fairy tale that TIFs only capture new development.

First, the TIF captures only new property tax revenue -- meaning money from new investment over and above what is already collected.

We see this year, where $490 million of base - which is the 'old stuff' - in Marion County's TIF districts, was converted into increment - which is, according to the fairy tale, supposed to be only the 'new stuff'.  That's a full third of the existing base.  How much time would it take to accumulate an additional $490 million of property value for our tax roles through development?  And yet, in one year that huge amount of property value is yanked from producing tax revenues for the schools, libraries, IndyGo, Health & Hospitals, fire departments, IMPD, parks, as well as the city-county government.

Where Tully gets alarming is where he promotes brand new fairy tales about TIFs.  He actually most succinctly framed the idea in a short twitter debate he had with Amos Brown a week ago.  Below is a screen shot of the back and forth so you can get the context in which Tully said

"If Midtown continues losing high income families that's a disaster for the city--particularly the most struggling parts of it."  Huh?  And, from the context, TIFs are apparently the answer.

Let's face it, a Mid-North TIF is a solution searching for a problem. 

Tully is promoting the idea that TIFs are designed to bring tax dollars into well to do neighborhoods to make them even better places to live so that rich people stay in Marion County.  His logic is other worldly when he can reach the conclusion that improving the lot of the well to do has a positive impact on those who struggle daily.

If it were just Matt Tully, a person, with this attitude, it would be part of the community conversation.  But, it is Matt Tully, the print media columnist, who is spreading this insidious meme that TIFs are for the better off areas.

You likely remember that extraordinary series of columns Tully wrote about the Meadows years ago now.  Where is that Matt Tully?  TIFs were designed to help just this type of neighborhood, where no dollars are going and a few dollars has a shot at making a real difference; first in the real estate, then in the lives of those who can't afford the rent in Tully's neighborhood.

If there were a prioritization of neighborhoods in need in this city/county, Meridian Kessler, Broad Ripple, and Butler-Tarkington wouldn't be anywhere near the top of the list.  Yet, they want to get theirs first, before the reality sinks in that TIFs have consequences, not all of which are good for Indianapolis and its future.

The last couple of years, Tully has taken immense amounts of time to experience IPS, and he penned riveting and pivotal pieces that helped to elevate the discussion of education in Indy.  Where is that Matt Tully?  Doesn't he know that existing TIFs already harm IPS' bottom line?  And yet he is promoting the creation of another square mile TIF in the IPS district. They call the downtown TIF the "dead zone", because of all the property value that does not send revenue their way.  IPS already has 22% of all taxable property within its district caught up in a TIF increment.  One-fifth.  That's twice the average for the County as a whole.  40% of the circuit breaker penalty (the property tax revenues that government qualifies for, but cannot collect due to the property tax caps) in the County can be attributed directly to TIF districts and their sequestration of property value.  With its higher percentage of property valued contained within TIFs than the County as a whole, one would estimate that TIFs cause an even greater percentage of the $15 million circuit breaker penalty that IPS will see in 2013.  What could IPS do with an extra $6 to $12 million a year more?

But this Tully, the one for whom there is no valid and valuable community conversation about TIFs going on, this Tully would add another square mile of untouchable tax revenue in IPS's district.  He seems to think that excluding residential property from the proposed Mid-North TIF is a positive.  But, lets face it, residential property has a 1% tax cap, and the TIF would capture the commercial values - which are higher in assessed value and which have 2 % and 3 % tax caps, so pay a greater proportion of property taxes from the same size lot.

Tully does columns on crime in a variety of areas in our city-county.  Yet, he doesn't mention that TIFs take revenue away from IMPD - not just shelter revenue from IMPD's grasp, but take it away in the form of the circuit breaker penalty.   According to Jeff Spalding, City Controller, the 2013 circuit breaker penalty will be over $5 million for IMPD and over $7 million for IFD.  As currently configured, the 2013 budget calls for no IMPD recruit class and one for IFD only if they can get their hands on a federal grant.  Again, at least 40 % of those circuit breaker amounts are directly attributable to existing TIFs.

Well, with or without Matt Tully, the community conversation about the reality of TIFs will continue.  Personally, I had hoped by this time our conversation would be about how much of our property value should be tied up in TIFs for the next 25 to infinity years.  Other jurisdictions that use TIFs and place a limit, set that limit at 5% of property value.  We are at 11%.  With the ramrodding of TIFs through the Council prior to the implementation of the recommendations of the TIF Study Commission, based on incomplete information, one has to wonder what generational damage these folks are doing.

Tully has a soapbox courtesy of the Star's circulation.  He also has a responsibility to be accurate with the facts he sprinkles throughout his columns to support his opinions.  On the TIF issue, he completely and utterly fails on the accuracy test.

Prop 15 Gets Public Hearing Tonight - With Notice

Unlike the August 27 meeting of the Metropolitan & Economic Development committee of the City-County Council, the agenda for tonight's meeting does list Prop 15, which seeks to expand the downtown TIF to include the Mass Ave TIF and the Bush Stadium TIF for a total additional footprint of 1.1 square miles.

Proposal 15 remains dead, according to Council Rules, but I expect it to get vigorous debate and a vote regardless.

Not on the agenda is Prop 291, which would approve the proposed Mid-Town TIF.

There is also a budget hearing for the Department of Code Enforcement to be held at the committee meeting tonight.

So, look for a long night.

Mid-North TIF - Developer Driven and Sans Critical Financial Details

A letter to the editor in yesterday's Star, signed by Councillor John Barth and leaders of a number of Mid-North Neighborhood Associations, claims that the proposed Mid-North TIF is not developer driven.

Hogwash.

Developer Leif Hinterberger testified a number of times at the TIF Study Commission.  During his testimony he noted the several years he has been working with Ryan Vaughn, and also listed a number of people in the City administration who he claims promised him that a TIF would be created to fund his project.

The project is 'The Uptown', on the northwest corner of 49th & N. College; a mixed use project of retail and residential.  The southern half of the block is owned by 49-50, LLC, whose agent is Leif Hinterberger.  The northern half of the block was owned by Leif Hinterberger, but recently sold to a Tom Melangton.

Many of these neighborhood groups signed letters asking for quite a bit of public money resources to be aimed at this project.

HOME funds and CDGB grants
Indiana Housing and Community Development Authority tax credits and grants
tax abatements
infrastructure curtesy of DPW
 

The entire block has been subject to a very large number of high weeds and grass complaints, forced mowing and legal action in environmental court, as well as a Health & Hospital demolition order on a building at 4902 N. College.

The Mid-North TIF as proposed (Prop 291 now before the Council) encompasses over a square mile of real estate.  The footprint is known, but nothing else has been disclosed to the public.  This is another pig-in-a-poke being pushed through before full disclosure is required through the passage of Prop 316.

If you take a peek at Prop 291 you'll see next to nothing as far as information, valuable or not, contained in it.  The MDC resolution, which I uploaded to Google Docs, does have the list of 1971 parcels contained in the footprint along with a map. 

Almost 1/3 is in Center Township and the remainder is in Washington Township.  All appears to be within IPS' district.  Center Township already has 30% of all taxable property contained within the increment of a TIF district.  IPS has 22% of all taxable property contained within the increment of a TIF district - what's another 700 some acres and over 1 square mile more.

And, lets not continue with the fairy tale that only new property value will have its property taxes diverted from IPS and placed within the TIF fund.  16 of 40 TIF districts have seen their base converted entirely to increment over the years.  So there is a track record that strongly suggests a high probability that the current value of property within the footprint will partially or entirely become another dead zone for contributing to the services of IPS, and the city-county.

Yes, the proposed Mid-North TIF is entirely project and developer driven.  And it puts an unknown amount of property value at risk, and stands to drive even higher the $15.2 million that IPS qualifies for but cannot collect because of the property tax caps.

If there is financial evidence that any of this is leaping to erroneous conclusions - the City has not provided it to the public.  With a lack of evidence to the contrary, we must conclude that past performance is the only indicator of future performance that we have.