Tuesday, July 24, 2012

Misinformation About TIFs Continue

I understand that the side bars in newspaper articles are supposed to quickly convey the high points of the longer article.  But the sidebar in today's story about the proposed expansion of the Consolidated Downtown TIF district continues the same old myths about TIF districts that have misinformed the public for decades.

In the article itself, reporter Jon Murray does have the space to get it right, but the sidebar does not do the public any favors.  Murray is an outstanding reporter, in my view, who is very keen to be absolutely accurate.  I think the reason the sidebar is incorrect is the pervasive misconceptions about TIF districts that have been promulgated for decades remain entrenched.  The TIF Study Commission revealed TIF's true nature, but the findings will take time to sink in.

The article is titled "Residential/retail plan for Mass Ave. triangular block has setback in City-County Council".  The sidebar is provided in the print version only.

The sidebar tries to give a snapshot of what a TIF district is.  Under "How They Work" is:
The level of property taxes collected prior to the new development being built still is sent ot schools, libraries, IndyGo and other local government units.  Once the district is disolved, all taxes collected flow to those units.
First, the level of taxes collected prior to the creation of a TIF district does not necessarily continue to flow.  This level is called the 'base'.  But, if the TIF does not perform or if there is a drop in assessed value, some or all of the base will be converted into TIF revenue and no longer flow to the taxing units (see "TIF Districts - Who Knew The Base Could Drop?")  In fact, in the one year between 2010 and 2011, there was an aggregate drop of $43.4 million assessed value in Indy's TIF districts.  14 Indianapolis TIFs had dropped to a base of ZERO by 2011.  The much vaunted, high flying, consolidated downtown TIF had 5 component TIF districts at zero base by 2011, of 8 total (I have information on 7 of the 8 component districts).  That year alone, the 7 component districts for which I do have information, the remaining base lost about $10 million more.  So, no, the base will not necessarily continue to flow to the taxing units - even in the best performing TIF district we have.

The second is technically correct - but it begs the question of whether or not the district will ever be dissolved so that all of those taxes can flow like regular property taxes, easing the burden on all of us taxpayers, as well as restoring funds to the taxing units that got caught in the tax caps.  21 of the Indianapolis TIF districts are not required to be dissolved EVER.  11 of the Indy TIFs do have a drop dead date.  Any TIF district created in the future is now required to be dissolved within 25 years of the date of creation.
In the full article Murray does complete the thought:
At the root of critics' concerns are tax-increment finance (TIF) districts, which have kept schools, libraries and the IndyGo transit agency, among other local governments, from benefiting from new developments' tax contributions. That's because the growth in property tax collections that those improved properties spur is diverted for years or even decades to support further development -- sometimes indefinitely, in the case of Downtown.
These are the two promises that are traditionally made to the public to tamp down any remonstrance - the idea that nothing will change with the current tax situation, and we'll all benefit down the road once the TIF is no longer needed.  The TIF Study Commission found out that these promises are routinely not kept and among their recommendations is that all existing TIFs be outfitted with a dissolution date matching the longest outstanding bond obligation of that TIF.  The erosion of the base is not so easily dealt with, but if we could avoid sounding like it doesn't erode, that in itself would be helpful.


Anonymous said...

"...sometimes indefinitely, in the case of Downtown."

And I would call that a debt Ponzi scheme - funded by tax dollars.

Anonymous said...

yup - we should never have torn down the grain elevators downtown - they gave the city an identity

Had Enough Indy? said...

Anon 11:53 - It operates more like a slush fund. In 2011 the Mayor gave $38 million of the 'excess' money away to the likes of Angie's List. He gave nearly $100 million loan to the developer of City Way - No So because they couldn't qualify for a bank loan - so much for the 'but for' test. In 2012 the Mayor took $40 million to balance the City's budget.

Had Enough Indy? said...

Anon 7:46 - Are we supposed to be so stupid that we buy the thought that the only alternatives are grain elevators or perpetual TIFs with never ending corporate subsidies for downtown? There is much to be discussed about TIFs, as well as other incentive practices. I would hope that the discussion could be more elevated and intelligent.