Shifting TIF abuse to state level

Fred McCarthy, Indiana Policy Review Foundation

The theme of a recent column in the morning paper was that, despite all the bad publicity, the General Assembly is actually considering some ‘good’ legislation. The writer indicates, by number, eight such bills.
Unfortunately, the first measure mentioned, which changes the rules of Tax Increment Financing (TIF), has the possibility of becoming a real lemon.
The measure would allow, the writer says, ‘development districts, funded by taxes collected within them, for downtown Main Streets in small Indiana communities.’ As written, it applies to communities of 20,000 or less and limits application on both a time and geographic basis.
What we are not told is that it inserts state-collected sales taxes into a TIF-type operation in place of property taxes. Where TIF areas now operate, governmental units basing their revenues on property taxes lose out. The changes would hand the tab to the entire state.
The calculation and distribution by the state is somewhat complicated for this essay to attempt. We’ll just skip to the description of who gets the money and how it is to be used:
‘Sec. 10(a) ‘The fiscal officer of an adopting municipality shall establish a district fund to receive money distributed to the adopting municipality under section 9 of this chapter.
’10(b) Money deposited in the district fund may be used by the adopting municipality for any of the following:
’10(b)-1 Improvements in the district.
’10(b)-2 Payments of principal, interest and other financing ….
’10(b)-3 Lease rental payments ….’
Note, there is no mention of which individual or body, under what circumstances or legal provisions, can spend the money, especially for something as general and undefined as ‘improvements in the district.’
In sum, the measure sets a framework and a precedent which may eventually be as widely abused as is current TIF policy, with state funds this time.
Fred McCarthy, an adjunct scholar of the Indiana Policy Review Foundation and editor of the blog indytaxdollars, represented various taxpayer and business organizations before the Indiana General Assembly for 40 years, being awarded a Sagamore of the Wabash by two governors along the way.