From the South Bend Tribune:
Tax Increment Financing has been available to cities, towns and counties in the state of Indiana for several decades. In that time, with regard to the types of project being financed, the use of TIF funds has expanded considerably.
The program originated as a means to finance public infrastructure to encourage private development. St. Joseph County, for example, used TIF funds to provide sewer service to the I/N TEK steel plant in New Carlisle. The plant then created jobs, which in return has provided new property tax revenue to the county from the business and additional income taxes from the employees. Also, the South Bend wastewater facility acquired a major revenue client that helps pay for industrial wastewater treatment. When the infrastructure is paid off, the district can be dissolved and the property tax captured by the TIF can be released to the county general fund.
For the sake of clarity, it should be noted that TIF captures property tax revenue only on growth in the tax base. The levy on the valuation of property at the time the district is created is distributed to taxing units based on the formula that applies outside TIFs.
The size of a TIF may be small and focused geographically, such as the South Bend Medical TIF which includes Memorial Hospital and the South Bend Clinic, or it may be large in square area such as the South Bend Airport TIF, which extends from the farthest western and northern boundaries of the city to the southeast area known as the Studebaker Corridor.
In all, the aforementioned South Bend TIF districts plus Eddy Street Commons/Triangle TIF and several others, TIF districts consume about 40 percent of the city of South Bend's geographic area.
As an appointed member of the South Bend Redevelopment Commission, I appreciate having financing tools such as TIF districts as a means to assist future development. At the same time, as a member of the South Bend Common Council I am concerned about the large area the city encompasses.
1. Generally, there is the question of how we allocate the costs of providing basic city services to the 40 percent of the city which captures all the levy on new assessments for use exclusively within the districts. (The basic city services are, for the sake of this discussion, police, fire and government administrative costs. These are considered operation costs and not available for TIF dollars unless released to the city general fund by an act of the Redevelopment Commission.)
2. More specifically, we have a circumstance where many areas in TIF districts are provided new streets, sidewalks and curbs as part of the improvements. But, residents in need of sidewalk and curb improvements in front of homes not in a TIF area are told by the city that it is their responsibility. (The city is considering a curb and sidewalk program for the future but as yet hasn't authorized or funded it).
3. The life of TIF districts and the expanding types of uses for TIF dollars are also issues. As stated earlier, the original intent was for TIF revenue to finance infrastructure projects that support private development. In South Bend, those uses now include a parking garage on private land, a public relations effort at branding and support for nonprofit museums. All of these may be worthy, but my concern is that as TIF revenues continue to grow and expenses expand, we may never see the TIFs dissolved and new revenues returned to the general fund. (The Airport TIF, under the original statute, does not have a sunset provision -- a date at which it will expire. Some newer TIF districts are sunset by statute and all TIF districts may be closed provided that they have no outstanding obligation to which the district's revenues are pledged.)
A basic truism about government dollars is that there will always be a real or perceived need for those funds.
If we are going to continue with the South Bend model as described, we will sooner or later have to address the aforementioned concerns. Some TIF dollars will need to be allocated to provide basic services. Some TIF dollars could, once released, help address a curb and sidewalk program outside the TIF.
South Bend officials may have to limit the length of the new TIF districts to the term of the original bond and require release of TIF dollars to the city general fund on an annual basis rather than waiting to dissolve the district when revenues exceed obligations.
In light of these concerns, Indiana's General Assembly should look again at its statute which allows a TIF district to exist for 25 years or more, providing no new dollars to a city's general fund during that time. Even if there is significant growth outside the TIF districts (which is not the case in South Bend), TIF can result in attractive projects within the districts and a lot of unaddressed problems of outside them.
http://www.southbendtribune.com/news/opinion/sbt-retool-indianas-tif-statute-for-the-benefit-of-all-20121228,0,3549284.story
