South Bend and Mishawaka have long relied on money captured from their tax increment finance districts to help pay for projects.
So it's no wonder that upcoming changes in the state TIF laws are causing some concern among both cities. South Bend and Mishawaka stand to lose tens of millions of dollars that could be used to pay for things such as streets, sewers, curbs, sidewalks and fiber optic cables in areas identified for redevelopment.
The good news is that cities across the state have been given plenty of notice to plan for the changes so they can adjust their budgets accordingly.
The affected districts -- called legacy districts -- are those created on or before May 31, 1995. Under the current law, those districts never expire and, as such, have generated an unending flow of redevelopment money for South Bend and Mishawaka.
Cities have gotten creative in using TIF dollars to pay for projects.
Recent examples include South Bend's use of $1.5 million in TIF funds to pay for construction of a new animal shelter, the purchase of a Jumbotron outside the studios of WNIT Television downtown and the purchase of lab equipment for F Cubed, a manufacturer of bio chips.
These sorts of moves make it easy to understand why TIF revenue has come to be regarded by some as a city administration slush fund. We have that concern and, apparently, so do some legislators in the General Assembly.
In a May 25 Tribune story, state Sen. Pete Miller said, "We're trying to get back to the original purpose of tax increment finance."
The problem, according to Miller, is that local governments have continued to accumulate TIF dollars long after the original purpose for those dollars has ended.
Though the change could dramatically impact the budgets of South Bend and Mishawaka governments, local schools, libraries, townships, the airport and Transpo all stand to reap the benefits of the change.
A lot of tax money that would have gone to libraries over the years instead has been collected and used in the TIF districts. Estimates are that the St. Joseph County Public Library has lost up to $500,000 annually in funding because of TIF.
This is the way TIF is supposed to work: All tax dollars, including the portion that would normally go to schools, the library and other taxing units, generated from improvements in the district are funneled back to finance infrastructure to support additional development. However, governments' use of the law has morphed into something other than originally intended.
We hope the changes in TIF will clearly and equally define the law as it applies to cities across the state. Taxpayers and the taxing units giving up revenue to subsidize TIF deserve that much.
