The headline on the front page of IBJ reads: “TIF glitch may imperil projects in Midtown.” (IBJ, Vol. 36, No. 27, p. 1.) The article carries over to page 39.
After a description of projects lined up to use TIF funds, the tone of the article echoed the headline. A $39 million development aimed for the area around College Avenue and Kessler “would bring much-needed density along the corridor that is part of a planned rapid-transit route running from Carmel to Greenwood.” (Id., p. 1.)
What is the “glitch” that imperils the plan?
TIFs (Tax Increment Financing districts) were created in California in the 1950s to develop urban wastelands where private enterprise otherwise would not develop. A line is drawn around a TIF area to be developed—a footprint—and bonds are issued to pay for development within the footprint. As the article notes: “Additional property taxes generated by new development in TIF districts go toward paying off bonds issued to cover government subsidies that make new developments feasible.” (IBJ, p. 39.)
A few paragraphs down we learn there was a “change in state interpretation of residential values” that “resulted in a $4.4 million loss in base assessed value for the district, crippling its ability to support new projects.” (Id.) As it turns out, the “2013 administrative change become (sic) apparent to municipalities only this February, when the state upgraded software.” (Id.)
This is where we get close to an explanation of the problem, as explained by Michael McKillip, executive director “of not-for-profit Midtown Indianapolis, Inc.”
We know Mr. McKillip will be objective about the matter since he is the executive director of a not-for-profit. (One example of a not-for-profit corporation is the National Football League®, and we know how altruistic and non-profit-driven the folks in that organization are.) As eporter Scott Olson writes:
“Even though TIFs cannot capture tax revenue from increases in the assessed values of residential properties, the state change still hampers TIF districts with a lot of residences.
That’s because residences within TIF districts now are assessed individually rather than collectively, and on net value (after homestead and mortgage exemptions) rather than gross value.” (Id.)
Apparently, private developers in an area of the city want to tax residents more—they want a new formula whereby residences would be taxed collectively; and maybe we can do away with the homestead exemption while we are at it—to free up money for their projects.
City services still are needed in TIF districts. It is unfortunate for the developers in question that so many residences lie within their boundaries.
No one is quoted as questioning the plans. No one seems to wonder why TIFs are used in areas where development will occur without subsidies—e.g., Broad Ripple—and areas like the former Meadows are ignored.
And when did anyone approve this mass transit corridor to run through Broad Ripple to connect Carmel and Greenwood? Did we have a referendum?
TIFs were made illegal in California for a reason. They become too easily abused by developers who take the money and leave—leave the debt of bond repayment to the taxpayers. They are cancers that put local governments and those governments' taxpayers on metaphorical chemotherapy.
TIFs are a gimmick that replace prudent city fiscal planning with something like magic. And, as Vernon Dursley sais in “Harry Potter and the Sorcerer’s Stone”: “There is no such thing as magic!” I would add—especially when it comes to municipal fiscal planning.