Tuesday, May 27, 2014

Tribune Reports State Law Change Could Cost South Bend Tens of Millions

From the South Bend Tribune:

Government officials in South Bend and Mishawaka are preparing for the loss of tens of millions of dollars in annual redevelopment revenue beginning as soon as 2025.
At the same time, other local taxing units, including schools and libraries, are primed for an unexpected influx of cash, as some of that money flows back into the larger, shared property tax pool.
The pending loss stems from a change in state law, approved by Gov. Mike Pence in March, as it applies to so-called "legacy" tax increment finance, or TIF districts -- those created on or before May 31, 1995.
The law passed the General Assembly in March with the support of local state Sens. Jim Arnold, D-LaPorte, John Broden, D-South Bend, and Ryan Mishler, R-Bremen. Reps. Dale Devon, R-Granger, Ryan Dvorak, D-South Bend, and Tim Wesco, R-Osceola, opposed the measure.
A TIF district is an economically depressed area in which revenue generated by growth in assessed value is captured to pay for infrastructure improvements -- streets, sewers, curbs, sidewalks, fiber optic cables -- in support of redevelopment.
Typically, that revenue supports a single, defined redevelopment project, after which the district disappears and the growth in assessed value is released to the other taxing units in the area, such as schools and libraries.
Under current state law, TIF districts created before July 1, 1995, never expire; those created between July 1, 1995, and June 30, 2008, expire after 30 years; and those created after June 30, 2008, expire after 25 years.
Over the past three decades or so, legacy TIF districts have generated an unending flow of redevelopment money for South Bend and Mishawaka, money the respective redevelopment commissions in each city have used to stimulate investment and grow assessed value.
No more, though.
The new law, which takes effect July 1, imposes a termination date of June 30, 2025, on all legacy TIF districts. The only exception is for the repayment of bonds issued in a district before July 1, 2015, in which case the absolute termination date is June 30, 2040.
"We're trying to get back to the original purpose of tax increment finance," said state Sen. Pete Miller, R-Avon, the author of the bill that led to the changes. "The intent is that you are enabling the creation of assessed value that otherwise would not have occurred."

In too many cases, Miller said, local governments have continued to accumulate TIF dollars long after the original purpose for those dollars has ended, creating what amounts to redevelopment slush funds.