Sunday, October 10, 2010

Star's "Tiff Over TIFs" Story Born On The Blogs

Had Enough Indy's Pat Andrews has written extensively about Tax Increment Financing ("TIF") districts and how the Ballard administration has been using excess funds from the property tax-driven TIFs as a slush fund. See here, here, here, here, here, here and here. This and other blogs have discussed it as well. See here, here, here and here.  Today, one of the leading stories in the Star essentially regurgitates much of Andrews' volunteer work without attribution. The story from Jon Murray reads:

Indianapolis' libraries are slashing hours on an unprecedented scale and shedding jobs, and the bus system has turned to budget gymnastics to balance its spending plan.

Yet, while most local government units are cutting back, a Downtown Indianapolis economic development fund that draws its largess from property taxes has been flush with cash.

City-County Council Democrats are eyeing that fund as a potential pressure-relief valve for the ailing library and bus systems, but that plan is not likely to find support from Mayor Greg Ballard or key Republicans.

The city has tapped the fund for more than $12 million in development-related spending recently -- $3.5 million for City Market renovations, $600,000 to help pay for a sky bridge to connect the Indianapolis Artsgarden to a hotel, and $8 million to offset another agency's annual support of the Indianapolis Convention & Visitors Association.

And Ballard has proposed using the same fund to guarantee a developer's $86 million loan to build a hotel, apartments and office and retail space near Eli Lilly and Co.'s campus Downtown.

By comparison, the Indianapolis-Marion County Public Library struggled to patch a nearly $4 million budget hole this year.

Council Democrats and other critics see misplaced spending priorities, but Ballard and council President Ryan Vaughn, a fellow Republican, say that's beside the point.
This story is long overdue, and I'm happy to see those pesky blogs Dennis Ryerson calls "noise" are doing all of the leg work for his paid reporters. The story's weakness, however, is the weight it gives to the Ballard administration's claim that legal requirements prevent the city from using excess funds derived from TIFs for other spending priorities:

Their legal review has determined that state laws -- which restrict where and how tax money captured for such development funds can be spent -- would forbid the city from diverting money for those purposes . . .

Most of the money in the fund must stay parked, as a backup reserve for $576 million in debt for Downtown projects, including Circle Centre mall and the new JW Marriott hotel. That debt could grow to more than $700 million as the city prepares to launch two new high-profile development projects in or near Downtown, requiring even higher reserves.

To reassure bondholders, the Bond Bank tries to maintain an off-limits reserve of 10 percent to 15 percent of all outstanding debt, Executive Director Deron Kintner said.

The fund serves the Consolidated Downtown Tax-Increment Financing District, the largest of dozens of TIF districts in Marion County. It collects the increase in property taxes from economic development within the district, with the proceeds generally intended to be spent on development-related activity in the zone.

State law leaves some room for interpretation. Craig Hartzer, a clinical professor at the School of Public and Environmental Affairs at Indiana University-Purdue University Indianapolis, said most Indiana cities have used TIF money for new buildings or other improvements that expand the tax base.

"When the proceeds are used for things other than physical infrastructure, that would seem to be worth more scrutiny," Hartzer said.

Vaughn initially said he was open to exploring the use of any excess in the development fund to assist the library and IndyGo. But he said an analysis by the council's lawyer changed his mind.
Not surprisingly, the story doesn't even question the "economic development" purpose of diverting $8 million a year to the CIB, which Murray accepts as being used to fund the ICVA. As the blogs have noted, the ICVA already had dedicated revenues derived by the CIB for its funding. The CIB, which faced bankruptcy until a series of local tax increases, state tax diversions and state loans were implemented to shore up its financial picture, decided to give $33.5 million to billionaire Herb Simon to prop up his Indiana Pacers team. That left the CIB short the money it was obligated to spend on the ICVA. Thus, TIF revenues were diverted and declared an "economic development" use. That's economic development, as well as spending money to market the city's convention business and downtown hotels and businesses, but spending on the City's public transportation system, libraries or even parking meter modernization, which the Ballard administration has determined we must sell off to the politically-connected ACS because no current funding exists to modernize parking meters, is not economic development? Go figure.

An alternative use of the excess funds--paying down the existing debt--is not even broached in the story. After all, TIFs were never intended to live on in perpetuity; rather, they were intended to live long enough to pay off the debt occasioned by the original economic development infrastructure improvements undertaken upon their creation. If the TIFs are generating so much excess revenues, paying down the debt early would return these large chunks of the property tax base that have been carved out to the tax rolls and allow the schools, libraries, IndyGO and other taxing districts access to the revenues they need to provide basic services without resorting to severe budget cuts or property tax increases. The president of the Greater Indianapolis Progress Committee, who also serves as President of the Greater Indianapolis Business Chamber of Commerce and who has never met a tax increase he doesn't support, Roland Dorson, adds his two cents' worth to the debate. "The Greater Indianapolis Chamber of Commerce's president sees diverting some excess revenue to the library or IndyGo as subverting the fund's intent," Dorson says. "If you start dipping from one bucket into another," Roland Dorson said, "you're going to have a far worse fiscal situation than today." Yeah, but it's okay to dip into the fund for billionaire Herb Simons' Indiana Pacers. Makes a lot of sense, Roland. I hope these people are stuffing your pockets with plenty of money to sell out 99% of the businesses your organization supposedly represents.


Indy Student said...

State law might restrict it, but last I checked, laws can be amended. If we went to the state house and said "Hey, we'd like to use this money to support X, Y and Z instead", I bet the state house would approve.

Citizen Kane said...

"An alternative use of the excess funds--paying down the existing debt--is not even broached in the story."

And it never will be.

As for state law preventing it - if they wanted to transfer money to the library or bus system, they would find a way - just as they found a way to transfer money to the Pacers from the TIF.

Frankly, I don't want them to shift the funds; I want them to pay off the debt and extinguish all TIFs and fund the government and encourage development by providing reasonably low taxes for everyone and stop picking winners and losers.

Marycatherine Barton said...

Me too, Citizen Kane. Of course, I was raised in a home where my parents never borrowed a penny from anyone, and were totally against the practice of usury.

dcrutch said...

Patch the law if necessary, but perform the basics of governnment first: public safety, streets, sewers, schools, & libraries.

Government (of any level) in America was not created as a revenue stream for business development. Reasonable taxation, employment, and regulatory policies- Yes. Outright degradation of our infrastructure for the nebulous hope of greater tax revenues in the future- No.

We leave a "hole in the ground" for awhile.