Monday, August 29, 2011

Combined, Marion County TIF Districts Lost $28 Million In Base Value In One Year

Taken all together, there was an aggregate loss of $28 million in the base assessed value of the Marion County TIF Districts.  For some background see "TIF Districts - Who Knew The Base Could Drop?".  The cliff notes are that each year the County Auditor sends a form to the Indiana Department of Local Government Finance for each and every TIF District in the County.  This is vital information for the DLGF and the County in calculating property tax rates.

I mentioned in that July blog entry that there were 15 TIF Districts whose base value had dropped to $0 at some time in the past.  I have now obtained the forms filed for these districts for tax year 2012 and have compared them with those filed last year.  No additional districts saw their base assessed value drop to zero.  But, all districts not at zero base AV, saw the value of the base drop between 2011 and 2012 taxing year.  When a TIF district is begun, the base AV is the value of all property in the district on day zero.  We are led to believe that that property value of the base continues to rise and fall with the market over time, but the taxes collected from those properties will always flow to the "base", or all of the taxing units (schools, townships, library, IndyGo, etc), and not be taken to pay off the TIF debt.  This turns out not to be true.

Combined, as I said above, the drop in Marion County TIF district base AV was $28,093,698.  Part of that drop is due to the fact that property values have dropped as the recession continues.  Using the drop in the total gross assessed value for the entire County as an good estimate of the general drop, we can see a loss of 0.48%.  Applying that percentage to the TIF district base AV, one would expect a drop in value of only $7.5 million.

The TIF Districts that experienced a drop in base AV greater than one expects from the recession were:
From the consolidated downtown TIF (8 districts - 6 at zero base AV)
145 - union station project - dropped $819,419 or 2.50%

From the airport eda (7 districts - 3 at zero base AV, one of which is government owned)
940 - wayne twp airport eda - dropped $1,353,814 or 0.58%
941 - wayne twp airport eda - dropped $7,779,920 or 55.55%

Both Glendale eda TIF districts have base AV's of zero

Other Indianapolis TIF districts (13 districts - 6 at zero base AV)
149 - united nw area - dropped $4,873,206 or 9.86%

From the Beech Grove Hospital TIF (3 districts - none at zero base AV)
170 - beech grove consolidated allocation area - dropped $182,146 or 5.59%

From the Beech Grove Amtrak/Conrail Redev. area (3 districts - none at zero base AV)
552 - south emerson redevelopment area - dropped $133,886 or 2.66%

Lawrence TIFs (3 districts - one with zero base AV and it was government owned) - recession drop only

Speedway TIFs (3 districts - one with zero base AV)
947 - speedway allocation area 2 - dropped $7,369,351 or 9.49%

Inactive TIF districts ( increment value is passed on to base - base is recalculated since TIF district still exists) (3 such districts - one with zero base AV - recession drop only)
Why these particular districts saw extra large drops in base AVs, I have no clue.  But, its a start just to know that they did.  Maybe someone with influence can find out and let the rest of us know.


Downtown Indy said...

I am not very smart about these things. What is the net result of losing base value (esp 'going to zero')? Does that essentially mean the tax revenue disappears or that other tax revenue streams must increase to offset TIF losses?

Anonymous said...

If the 'base' is zero, then all property taxes collected in the district are considered an increase generated by the TIF, which then captures all tax receipts. What happens to the excess revenue is controlled by the development district Board. Base receipts would still go in the general fund.

Had Enough Indy? said...

DI - first and foremost it means that the promise that the base is a permanent source of CONTINUING funding for schools, township, libraries, etc, is not true. So, when folks look at TIFs, they should get that notion out of their heads.

Beyond that we hit an opaque wall. If real estate values drop, as we are seeing now, the base drops. If there is growth and tax rates drop, some of the base's growth transfers into the TIF segment of the area.

With the very large drops that we see in a couple of areas from last year to this, I can only say - WHY? Legitimate and open question as to the cause. I'm with you - I do not know the answer, but I'm very much interested in the answer.

There is one disconnect that I have to bring up - the way the base is recalculated each year does not take into account the amount of money needed to make that year's payments on the bonds. If money is accumulating in the TIF district fund, then it does not transfer back to the base. The City CAN choose to 'release' some of the excess to the original taxing units. But, it is up to their charitable mood to do so.

Clear as mud yet?

Had Enough Indy? said...

anon 8:40 - if the base is zero, how did it get to be so? Recalculating the base each year is not aimed at preserving the base, just preserving the flow of dollars into the TIF fund to make the debt payments. So, the creation of the TIF district did not necessarily generate all of the tax dollars now funding that TIF. If you can erode the base through these yearly recalculations, then the base is not secure. The idea that the base is secure is one of the promises made at the time of the creation of a TIF district that is not true.

The TIF fund exists on its own. True, some of the property taxes from the base do flow to the City and County's funds, including the general fund. But, nobody should be redirecting excess TIF money to the general fund. That's part of the stink with the transfer of $38.5 million from the downtown TIF to cover next year's budget. Even in that case they are making an excuse of 'repaying dollars spent on infrastructure' to make it happen.

Downtown Indy said...

The mud is a bit more clear. I'm continuing to re-read these items to try and make sense of them.

Thanks for the explanation.

Anonymous said...

You can bet B+T will be writing those bonds and collecting the $. A B+T lawyer is writing the MDC resolutions.

Anonymous said...

sorry thats for previuos post for 4 new TIFs