Monroe County just received notification that its annual TIF Neutralization calculations were accepted by the Department of Local Government Finance, the final step before the certification of our county’s net assessed value (NAV) — the value of all real and personal property in the county, after all deductions, abatements, and exemptions. The forms and calculations are available here: 2012Pay2013 TIF Neutralization.
But what is TIF neutralization and why does it matter?
To answer this question, remember what Tax Increment Financing (TIF) is. TIF is a technique for spurring economic development in a particular defined area (the TIF district) by investing in infrastructure that serves that area, and then using the additional property taxes generated by the new development as a result of that infrastructural investment (called the “increment”) to pay for that investment. The infrastructural investment is frequently primarily in roads, trails, and sewers — but can also be in the form of parks or other amenities that serve the TIF district — and can even be in the form of training assistance and other intangibles.
This increment — the additional property taxes owed on new assessed value in a TIF district as a result in the infrastructural investment — is revenue that does NOT go to the other units of local government that serve the TIF district (e.g. the county, the public library, the township, the city or town, the school corporation, etc.). This is the source of the greatest controversy associated with tax increment financing — the development that occurs in TIF districts may result in an additional burden on the units of government that serve the TIF district, yet the revenue from the TIF district is siphoned off to support new infrastructure and development in the TIF district.
A related concern with tax increment financing is that a TIF district will capture (and siphon off from other units of government) the increment from increased property values — even from property values that are and would be increasing anyway. Why would they be increasing anyway? Maybe the real estate market is hot in the area. Maybe the area has become much more desirable for any one of a number of reasons. In any case, the annual TIF neutralization process attempts to address this concern by identifying the total increase in assessed value in a TIF district in a given year and then determining whether or not it is:
- an increase that would have occurred anyway, due to increasing property values in the area; or
- an increase that is beyond that of the surrounding area, and therefore attributable to the investment in the TIF district.
The increased assessed value from (1) — the increase that would have happened regardless of the investment — belongs to the units of government that serve the TIF district. The increased assessed value from (2) — the increase that occurred due to the infrastructural investment, i.e.,the increment — belongs to the TIF district.
Although you can read the TIF neutralization forms in detail if you want, the following table summarizes the property taxes that each TIF district will receive in 2013 (actually, the maximum possible property taxes that each TIF district will receive). Again, in principle, this is the increment that is attributable to the investment in infrastructure in the TIF district (but is therefore not available to the other units of government that serve the TIF district).
2012 Pay 2013 Monroe County TIF Neutralization Summary
|Jurisdiction||TIF District||Potential Tax Increment for the TIF District|
|City of Bloomington|
|State Road 46 (North Park)||$160,017.00|