From the Terre Haute Tribune Star:
New road construction is planned for the city’s eastside tax increment finance (TIF) district, but it will likely be paid for using a newly created entity to help avoid breaching the city’s constitutional debt limit.
All Indiana cities have constitutional debt limits. One way to issue more debt than the limit allows is to create a special legal entity to issue the debt on behalf of the city, said an attorney for the Terre Haute Department of Redevelopment speaking to the City Council on Thursday night.
The special entity, with council approval, could issue debt that would be repaid by the Terre Haute Redevelopment Commission, which oversees the eastside TIF district. The money would be used for the next stage of road and other construction in the area, said Cliff Lambert, executive director of the Department of Redevelopment.
The plan would require the approval of the nine-member City Council. Lisa Lee, an attorney for the Redevelopment Commission, said she hopes to bring the matter to the council for approval in October.
There are several ways around debt limits allowed by the Indiana Supreme Court, and one is by creating a legal entity, such as a not-for-profit, that can issue debt on behalf of the city and then lease its services back to the city, Lee stated in a 2004 paper for the Indiana Association of Cities and Towns.
“If the Indiana Supreme Court strictly interpreted the constitutional debt limit, most municipalities could not fund their capital needs,” she wrote.
The constitutional debt limit in Indiana is an entity’s net assessed value divided by three and then multiplied by 0.02, Lee said.
Creating a leasing entity for the TIF district project is not necessary to avoid exceeding the debt limit, but it will keep the city safely below that limit, Lee said after the Thursday night meeting in City Hall.