Tuesday, March 25, 2014

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. 


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.


Anonymous said...

Is there any report way to figure out from where the additions to the various increments comes?

Had Enough Indy? said...

Do you mean in general terms, or specific parcels?

Certainly the general is fairly discernible in the annual form - increased increment can come from new construction, roll off of abatements, and increased property values and decreased by demolition.

If you want specific construction projects, you could conceivably do a search on the Citizen Access Portal available at www.indy.gov/dce.

For abatements you could do an open records request from the Auditor's office - specify year and area.

But, I know of no detailed report on each TIF. There is supposed to be one sent to the Council annually, but last year it was totally anemic and held no hint of detail.

Anonymous said...

A friend pointed out that the Midtown Increment appears to be $470K and not $470 M

Had Enough Indy? said...

anon 10:50 - you are correct - typo - sorry

Anonymous said...

Are you sure that abatements coming off the books are going into the increment and not the base in Midtown?

Had Enough Indy? said...

anon 3:36 - yes.

You can review the forms yourself.

Hopefully this won't be too much in the weeds...

The form records the old AV and the new AV of the district (base plus increment). It subtracts the amount of abatments that rolled off (among other changes) before determining the growth of the district. This growth number is then used to determine how much the base grew. The new base AV is then subtracted from the new AV of the district, thus providing the new increment AV.

Unfortunately, there isn't a pure example of this among the forms. So, lets make up some numbers. Lets say that all the growth in the district is due to abatements rolling off so we can follow the numbers more easily.

these are the lines of the form in order:
1. old AV base = 50M
2. old AV increment = 100M
3. total old AV district = 150M
4. total new AV district = 175M
5. new construction = 0
6. demolition = 0
7. abatements rolled off = 25M
8. appeals of assessment = 0
9. line 4 - line 5 + line 6 - line 7 - line 8 = 150M
10. growth factor (line 9/line 3) = 1.00000
11. new base (line 1 x line 10) = 50M
12. new increment (line 4 - line 11) = 125M

All the growth from abatements rolling off end up in the increment.

Anonymous said...

Thanks as always

Had Enough Indy? said...

You're welcome.