In short, primarily because of cost overruns on the construction of the Carmel City Center (think Palladium), which is funded by the tax increment in a TIF district, the Carmel Redevelopment Commission has gotten into a situation in which it doesn’t have any income left for further redevelopment after its debt service payments are made. The City of Carmel is essentially agreeing to bail the Redevelopment Commission out by refinancing its debt. The savings through lower interest rates will either allow the debt to be paid down faster or will allow additional revenue to complete the development. In exchange for the bailout, the City Council will be asserting greater control over future debt of the Redevelopment Commission.
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
Back in March of 2012, the Indianapolis-Marion County Council created a commission to study the usage and impact of Tax Increment Financing (TIF) districts in the county. In particular, the commission was to review the status and performance of current TIF districts in Marion County, to review and make recommendations to make more transparent the process by which TIF districts are created and ended, and to study the impact of TIF districts on the other taxing units that provide services to the district (generally one of the biggest concerns about the use of tax increment financing).
The activities and meetings of the commission can be found here:
On June 28, the commission just came out with its final report, which is by far the best and most clearly-written exposition and analysis of tax increment financing I’ve ever seen. Although a lot of the data and some of the specific enabling ordinances are specific to Marion County (and to the use of TIF districts in an urban area), I highly recommend anyone interested in community and economic development to read this report. Among other things, it explains very clearly:
The life cycle of a TIF district
How TIF compares to other economic development tools
Fiscal analysis and impacts of tax increment financing
The role of TIF in overall economic development strategy
This past Wednesday (4/25), Monroe County Highway Engineer and Public Works Director Bill Williams gave a presentation to the Monroe County Redevelopment Commission on the capital improvements that have occurred in the three Monroe County Tax Increment Finance (TIF) districts to date. This report is the best summary I have seen to date of all of the work that has been done in these three TIF districts, and is probably the only source that the public has to actually see what work has been financed by the districts, and what is still planned.
After yesterday’s posts about Monroe County’s Tax Increment Finance (TIF) districts, several readers asked for more details about the three districts. Here are maps and annual reports for each of the three TIF districts.
Westside Economic Development Area
The Westside Economic Development Area is also frequently referred to as the Richland TIF. It has been tremendously successful for Monroe County, and many business have located there, including Cook, Tasus, BioConvergence, Printpack, and GE. Ivy Tech is also located in the Westside TIF.
The Bloomington Township State Road 46 TIF District is also called North Park, or more informally, Criderville.There has been very little development in this TIF to date, and thus very little revenue. However, in this TIF, the developer is backing the bonds, so he is on the hook for any shortfalls in revenue.