Shifting the Fallout is NOT Fixing the Problem

Shifting the fallout from too many TIFs, is not fixing the problem - and it is NOT fair.

TIFs are syphoning off roughly 15% of all property taxes - and will do so in some cases FOREVER.  Two years ago, TIFs caused half of the circuit breaker penalties which limit how much property tax revenue taxing units can actually receive.  We are approaching the point where, for every tax dollar captured by TIFs, a dollar will be taken from the taxing units that provide needed services with those revenues.

There is currently a barrage of tax and fee increases being proposed, as well as a proposal to float 30 year bonds with new gas tax money provided to Indy by the State. 

Let's look at them one by one - as there is a pattern here.

The ongoing effort to eliminate the local homestead credit has, for the moment, been denied by the Council.  Put simply, if the local homestead credit is eliminated, the City gets more money, but most others lose tax revenues - most notably the various school districts.  It is a zero sum game.  The Mayor wants to shift the fallout from his coffers to other units of government.

The local homestead credit is now being repurposed and packaged with the fact that those property owners within the old Indianapolis Police Department footprint are paying an additional 0.3486 tax rate that the rest of us do not.  (see excellent article by IndyStar's Jon Murray)  This additional tax rate is calculated to bring in $35.3 million this year, minus the circuit breaker penalties caused by TIFs and too much debt.  Now, this is about one tenth of the total tax rate paid by most taxpayers.  When IPD and the Sheriff's Department were resorted/merged, this tax footprint was not reconfigured to the entire IMPD district; likely because it is a tax increase and may have scuttled the merger.

The marketing folks have decided to market this proposed reconfiguration as 'only fair'.  While there is a grain of truth to that, implementing this change will induce another 'unfair' reaction.

If the IPD tax is spread Countywide, the $35 million would be pulled from more peoples pockets - lowering the amount paid by those in the IPD district, and increasing the amount paid by those outside the IPD district.  The tax rate inside the IPD district would drop, and the number of property owners hitting the tax caps would drop as well.  The tax rate outside the IPD district would increase, and the number of property owners hitting the tax caps would increase. 

To avoid getting too far into the weeds, and simply put, the City and IPS would see a rise in the property tax revenue they collect, while the Townships and Township School Districts would see a loss in property tax revenues they collect.  It is a zero sum game.  It is simply a shift of tax revenues from the areas outside the old city limits to those within the old city limits.

Now, personally, I could find my way to support this shift IF the City passed an ordinance tying the creation of any new TIFs to the retirement of old ones - a step in the right direction of actually fixing the negative effects of capturing too much property in TIF slush funds.

There is also a proposal to increase the stormwater management fee that appears on your property tax bill, but is a so-called 'user fee' rather than a tax.  There are too many facets to this proposal to go into all of them right now.  Again, simply put, the marketing arm of the City has decided a winning pitch is to cast this current configuration of this fee as 'unfair'.  The contend that residential property owners pay a fixed $2.25 per month ($27 per year), while non-residential property pays by the amount of stormwater-impervious surface on the property.  The proposal would increase the amount collected by 40%, and change all property to pay $1.10 per month for each 1000 square foot of stormwater-impervious surface.  It would be only by 1000 square foot increments - so if you had 1001 square feet, you'd pay $2.20 per month.  Gravel drives are considered impervious surface for this fee calculation, by the way.

All this begs the question - what happened to the $20 million a year they already collect for stormwater management projects?  Well, the first $10 million per year from the initial fee in 2002, did not go to any new projects, but was assigned to paying back old bonds floated for anything attributable to stormwater - freeing up money for projects having nothing to do with stormwater.  Most of the second $10 million per year, from the 2006 fee increase, has been consumed by the practice of floating bonds for projects, rather than paying as you go.  This caused about a third of the fee dollars to be flushed down the toilet in paying bankers, bond salesmen, and interest.  Additionally, the City has also stopped using any other funds to pay to operate the stormwater system - about $4.5 million per year.

By not paying as you go, the City has yet again reached into your childrens' purses to pay for your stuff today.  Sure, it helps get politicians reelected, but it is not prudent fiscal policy.  If they had been prudent, we'd have $20 million a year for projects and stormwater problems countywide could have been resolved within 10-15 years (they said the need was $246 million in improvements in 2001).  Instead, they floated 30 year bonds and wasted a third of the money for 30 years.

Have they learned their lesson?  Nope.  The already plan, should the fee increase be granted, to float at least 7 bonds which will consume 60% of the fee and leave only 40% for pay as you go projects.  Who knows what the fate of the 40% will be when the next Mayor seeks re-election.

The last item I want to put into today's hopper is the proposal to float a $135 m bond for streets and sidewalks using the additional $7 million in gas tax proceeds the State has decided to share with the City.  Here's the math.  $7 million over 30 years is $210 million, but the bond would only generate $135 million.  That's $75 million flushed down the toilet to pay bankers, bond salesmen and interest.  Again, spending $135 million on sidewalks sounds good in a 10 second reelection campaign ad, but it is bad fiscal policy to do it this way.

Putting too much property value in TIF districts, has consequences.  Floating bonds unnecessarily, has consequences.  Shifting the fallout from these bad practices is NOT fixing the problem.  It merely makes life easier for the current City elected officials and their buddies.

This City continues to create TIF districts, the effect of which is to reduce property tax revenue for basic services - like police, fire, and schools.  City leaders continue to float bonds that rob the next generation, instead of paying as you go.  They figure that the lack of services and a good marketing pitch will get you to dig deeper in your pocket.  There's a sucker born every minute, as PT Barnum used to say.  Guess who our City leaders think the suckers are?

Budget Prestidigitation - False Long Term Solutions To Be Served Up

One consistent hallmark of all of City budgets since Ballard was elected Mayor, has been the early public relations effort flowing through the press, trying to shape what the public thinks about the budget.  For instance, in the first couple, while revenues were growing, the early press claimed near-crippling shortfalls.  The early press dictated the later press.  As the recession's impact actually began, and election rhetoric was heating up, the early press claimed near dodges of cuts in services - while the administration pulled tens of millions of dollars from the downtown TIF to make ends meet, hoping not to be noticed.

We now enter the post-recession era, as property values are rebounding.  Now what will they blame for any budget difficulties?  Income tax revenues are expected to grow.  Increased property values should lead to fewer people hitting the tax caps.  Budgets, by all revenue accounts, should be getting easier to manage than the past few years.

Yet, where are we?  I point to two news items by IndyStar's excellent City Beat reporter, Jon Murray.  Yesterday Murray reported on the property tax bills that are about to be mailed in "70% of Marion County homeowners to see higher property tax bills".  He writes:

In Marion County, the treasurer’s office estimates that 64 percent of the 366,264 bills it will send out for properties of all types will reflect an increase. The total amount being billed this year, slightly more than $1 billion, is up 4 percent.

There are three sources for the increased bills and the increased total tax collection.  First is the increased assessed value for Marion County property.  Property values outside of TIF districts increased by 1%, according to the budget order of the Department of Local Government Finance.  Second is the increased property tax revenue being requested by the various governmental units.  The third is all property value kept from paying for local government services because they are either consumed by TIF districts or deliberately kept as government-owned, tax-free, property.

Today, Murray's story is about the behind the scenes discussions on the 2014 budget, which are said to be veering necessarily to layoffs of police and fire personnel, among other cuts; "Indianapolis, Marion County leaders are finding $30M in budget cuts a tough task".

Now administration and council leaders are staring at options that range from eliminating vacant positions, renegotiating contracts and making simple accounting transfers to much more difficult considerations, such as cutting back on a parks after-school program or transferring some pools on school grounds back to Indianapolis Public Schools’ control.

Then there are the possibilities of police furloughs and layoffs of firefighters and deputy prosecutors, as well as cutbacks on public defender services.

They want you to blame property tax caps for any coming public safety service cuts.

A new wrench in the debate is recent notification from the state that tax caps were expected to trim $10 million more than expected from the municipal budgets this year, adding more pressure to cut back. 

So, how did property tax cap penalties grow so much?  If the assessed value is rising on 64% of all property owners, fewer people should be hitting the tax caps, and the tax cap penalty hitting local government should be dropping.

The silent player in all of this are the TIF districts - which were expanded significantly this year despite the fact that they accounted for over 40% of the tax cap penalties for local government last year.  The more property value consumed by TIF districts, the higher the hit on local government's coffers.  Its simple.

Any real long term solution will have to put more property value on the non-TIF property tax rolls.

We MUST retire older TIF districts as their oldest bonds become due. 

We MUST call on the Airport to return to the tax rolls, the hundreds of acres it does not need for aviation purposes.

We CANNOT grow fast enough through so-called economic development cash giveaways to compensate for the speed with which we have grown our TIF districts.

Yes, this year they'll blame tax caps, when they have shown no desire to limit the real cause of the post-recession budget difficulties.

You Can't Fix Wilfull Ignorance and Greed

Its very unfortunate for Indianapolis that Matt Tully has an opinion column in which he can toss about misinformation and press for more of your tax dollars to be spent on his neighborhood's pet projects.  And its very unfortunate that he does that, not by providing well reasoned arguments, rather, by maligning one of the few elected officials still willing to stand up for sensible government that will not break our economy and who presses for sustainable funding for police, fire, libraries, schools, and other basic services that benefit all of us, rather than the few.

Tully is in love with the government giving your tax money to private developers and campaign donors, and he really evidences no concern with what that does to the public's ability to finance basic services.  He stood in favor of the Mass Ave TIF, that robs known tax proceeds to pour money into an area already building and thriving.  He stands in favor of the well to do in his own neighborhood and those neighborhoods nearby, to decide how THEIR tax dollars will be spent, while all the rest of us chumps can chip in to make sure his neighbors get police and firefighters to their door whenever they dial 911.  He cries a good game about the schools - but lets see where he sends his child.

But, the lowest point is reached when he maligns Councillor Brian Mahern, one of the last, if not the last, elected official willing to speak publicly of our need to be cautious about the use of TIFs, and who will acknowledge aloud that the more tax revenues we corral inside TIFs, the less money we have to fund basic services.

The pressure to frivolously spend, to ignore that each decision has pros and cons to be weighed, to follow the lead of those whose only goal is to feather their own nests, that pressure is great and has caused most who truly understand the impact of TIFs and corporate welfare to stand down and only whisper the truth among known allies rather than spread that truth further.

The sky is blue.  Water is wet.  And, like it or not, TIFs have consequences.

I had thought Tully was a reasoning person.  But, he has proven me wrong.  He just wants you to foot the bill for his basic services so he and his well off pals can give thier's to developers to make their neighborhoods more fun.

The old myths - that tax money before a TIF is established continues to flow to the schools and police, and that the bankrolled developments will spur free market development - continue to be pressed by those like Tully.  Meanwhile, the Mass Ave TIF and the Mid-North TIF stand on its head, the traditional use of TIFs to help struggling neighborhoods pull out of great need.  Now TIFs are to aid the well to do and to boost areas that are already seeing the free market work.

In the age of tax caps, unexamined TIFs and their unfettered use, will grind on our City's economy.  Then folks like Tully will leave because there are even fewer police and firefighters to cover our whole county, fewer tax dollars reaching the library and the schools and IndyGo.  And, instead of TIFs making his neighborhood more enticing to executives, it will make everyone more fearful of living anywhere in Marion County - fearful of crime as well as fearful of providing a very weak start in life for their children.