By Bill Taft in the Indianapolis Business Journal:
The disagreement between Mayor Ballard and City-County Council Democrats over the use of tax increment financing sounds like a wonky tax policy debate, but behind this conflict are far more fundamental questions of how we use our city’s resources to prepare for its future.
Do we carefully hoard our shrinking property tax base to serve our growing local government needs, or should we leverage our assets to create economic activity that could dramatically increase future tax revenue?
While TIF policy details can be debated, it is increasingly clear that building a viable economic future for Indianapolis requires that we use tools like TIF to lay the groundwork for expanded economic activities.
The districts in their simplest form capture future increased tax revenue that will flow from a new development to fund the public components of that same development project. It was first deployed in Indianapolis in the 1990s for projects like Circle Centre mall and has grown in importance as a financing tool for a range of projects around the city, with a high concentration of them downtown.
Critics complain that TIFs prevent the increased taxes from these new projects from flowing to existing tax-supported uses like public schools, libraries and public safety.
Why has TIF financing become more common? Simply because Indianapolis faces growing redevelopment challenges as its traditional sources of local and federal tax revenue shrink. State property tax caps combined with declining assessed property valuation of Marion County have resulted in lower tax revenue. It seems unlikely given its growing deficits that the federal government will provide funds to make up for declining local funds.
Indianapolis faces the obvious need to retool downtown, neighborhoods and commercial/industrial areas to compete regionally, nationally and internationally for economic development. The only real opportunity to generate greater tax revenue is to leverage investment into improving existing neighborhoods (raising assessed values), and attracting more highly skilled residents who will generate more income taxes.
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The citizens of Indianapolis have dreams of what our city can become in spite of our challenges. Are we willing to invest in this future by tightening our belts and taking some risk today? If so, strategically using TIF to remake our city into the competitive place it needs to be seems like a wise move.
I hope the mayor and the council can work through their differences to accelerate investment in our future.•
See the full article here:
http://www.ibj.com/article?articleId=36094
