Friday, September 28, 2012

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.


Anonymous said...

The areas in the southern part of the Midtown TIF area are deteriorating. If that continues, the folks bordering that deterioration will continue to exit. If what wealth is there leaves, it will leave taking both its income tax base, and its AV base, with them. With the caps, and with the homestead credit, the "still OK" portion of Midtown are making a huge contribution to the city's tax coffers. If we could start to reverse the deterioration ( I admit schools are no small portion of the problem) ) and we could fill some of the areas great housing stock with people who wanted more urban environment, might that not be a really good thing for the city's tax base, and thus be a good ting for all of us?

Had Enough Indy? said...

How about this approach? We first figure out which areas of Indy/Marion County need the most help? Much of that is likely already available. And, how about we decide if we have already crossed the threshold of 'too much' property value in TIFs. If we have crossed a line, we need to insist that old TIFs be dismantled to make room for new TIFs. If we still have capacity to employ TIFs, we target, in as small an increments as we can, in as many places as we can, target the deteriorating centers.

We also have federal funds, always insufficient for sure, tax incentives outside of the TIF tool and other means of honing in with public dollars.

A square mile of TIF, for projects outside of the deteriorating areas, makes little sense. The goal should be to help the entire city, and the focus should be on the areas in most need for basic quality of life - not to improve an already good situation.

More important than my opinion - we need to have a community conversation so that the double edged sword of TIFs can be better understood and wielded more wisely.

The step we are missing here is the implementations of the recommendations of the TIF Study Commission. All together they add up to a simple requirement for full disclosure as to the financial estimates for any proposed TIF. Then the public and the Councillors can actually review what is proposed, perhaps improve it, and vote on something that can be understood, not a pig in a poke.

25 years is more than a generation. Its critical that we get it right.

Anonymous said...

If it's based on "who 'needs' the most help," you end up with the UNWA TIF, where no one, even with incentives, wants to do a project, and you get what you want the least, which is a TIF that doesn't create new AV, but, because you've used TIF money for infrastructure, you do lose your base.

There absolutely nothing wrong with a discussion about how much AV is under TIF, but even that isn't an isolated discussion, because it ignores whether or not the area under TIF is really creating new AV. If you try to do that by lumping all the TIF districts, you get a distorted picture. Some TIFs were lousy bets. The housing TIFs seemed like good bets but got lost in a market situation that no one anticipated. Same with the airport TIF.

The "entire" city gets helped if a TIF ends up creating AV and income tax revenue. Our downtown was not an already good situation, and neither is most of Midtown, but both can be used for the good of the entire city.

There's nothing inherently wrong with most of the Commissions recommendations, and most can be complied with prior to their enactment. The Commission, however, was mostly political theater, and the capacity to understand the "crucial" information requested, in any relevant detail, isn't present in our Council, so most of it will equate to presenting synthesizer sheet music to a kid with a tin drum.

Jackie Nytes, probably the best Councilor we've had, probably had the best analysis of TIF at the Commission hearings, which was, essentially that if a TIF creates AV, it can be a very good thing.

Had Enough Indy? said...

Are you aware that you just made a good case for 'TIFs don't work'?

The only point you missed is that we have been bailing them out for years by transferring funds from one TIF to another, and of all things, raising everyone's property taxes specifically to put the money into an underperforming TIF.

As for income taxes, which always comes up after a good arguement that TIFs aren't producing new property tax revenues for the units is made - well the schools, library, IndyGo, and Health & Hospitals, don't get local income tax revenues. Over 90 % of local income taxes goes to City-County government.

One more point - 25 of the 40 TIF districts underperformed the County as a whole when AV growth is used as the measure. So, the burden to prove TIFs create AV is up to somebody else to make.

Anonymous said...

Nope he's 100% on target,,IM betting he thinks its a good thing for Indy to provide 2300new jobs,a tax bases from the old fire station and 2,000,000 for small biz loans,etc etc etc....not seeing the problem here.....

Had Enough Indy? said...

anon 4:29 - those jobs and that investment can be made without a TIF. Another area that doesn't need help from the government. Its just the City looking to capture taxes from development they know is going to happen anyway, instead of letting it enrich the entire County.

Anonymous said...

and no sense in seeding your lawn - chances are that birds, left to their own devices will seed it perfectly well, and heck, even if it doesn't rain for a few years...

Had Enough Indy? said...

anon 8:40 - how does your brain actually work. That leap of logic makes sense to you?

Anonymous said...

It is abundantly clear that the "fix" in in for proposition 15. Our council just approved to send forward to the full council a bill by it's own rules that is dead, and they amended the dead proposal to boot!
It's bad enough that we subsidize sports barons,bond bankers et. al. and that we have 40+ TIFs that suck needed revenues from the infrastructure, now we are creating TIFs in areas that aren't blighted and are being developed without TIFs just so some other connected groups can group some more 'free' money.