Bloomington has a number of TIFs, or tax increment financing districts — in fact, six of them. They can be confusing, and people wonder what sort of deal is being cut by the city in its apparent partnership with private entities inside the TIF borders. To simplify, TIF financing uses the increased property tax revenues (what is called the “increment”) of property in the district to pay for construction of roads, sewers and other infrastructure needs inside the district over a period of 20 years or more.
Though a TIF is most often thought of as a financing tool, it is also a land development and improvement tool. The TIF plan, usually referred to as a redevelopment plan, provides governments and community stakeholders with a forum and process to manage their redevelopment and growth for years to come. And local tax revenue generated within the TIF district can be targeted to pay for such redevelopment.
Examples of such targeted expenditures in the city include the recent West Kirkwood and South Walnut streetscape improvement projects. Revenue from one of the three TIF districts in the county, this one on the west side, helped to pay for Ivy Tech’s new life sciences building.
One of the arguments frequently brought up opposing TIFs is that school corporations (as local taxing units) will not receive any of the incremental revenue for the improved area while the TIF remains in place. But the school corporations still receive their portion of the base assessed value of the area. And though they may not receive any of the incremental assessment, it can be argued that without TIF revenue, there may be no money to pay for the improvements needed to make the area inside the TIF suitable and attractive for development. The theory is that as TIF-financed improvements to roads or digital cable systems or bike paths are made, those improvements then attract even more development to the district, leading to job growth and a more vibrant local economy.
Tax increment financing is a powerful tool for development, as it allows local governments to direct funding to specified projects and areas. Since TIF revenue can be used in blighted areas or for economic development, it can help fund an array of projects. Around Indiana, TIF districts have been mapped out to finance capital projects, fix decaying infrastructure, to acquire land and for environmental remediation.
As private investment inside a TIF district’s boundaries develops and grows, so will the need for more government-supplied services to those areas. But one downside of a TIF is that because it shifts tax revenue from a city’s or county’s general fund to support development within that particular TIF, there is less new money available to spend on more general citywide or countywide services such as police or fire protection that serve everyone, including those inside the TIF district.
The recently discovered mistakes that misdirected some TIF funds away from the districts point up the complex management problem they present. That makes it all the more imperative that all TIF-related transactions and decisions be transparent. Otherwise, as with many financial tools, misuse and bad management can lead to more debt than revenue, or to someone or some entity being shortchanged.
Management of the local districts fell into disarray with poor oversight by governmental officers, with boundaries of the TIF districts becoming muddled.
In the case of the TIF district that includes the Smallwood apartment complex, for example, hundreds of thousands of dollars in TIF revenue were channeled into the city’s general fund instead of the district.
The recent problems with city and county TIF districts should serve as a warning that more careful management of these development tools is needed.
