Thursday, August 30, 2012

Property Values In Indy's TIF Districts Plummet More Than 30%

Fellow blogger Pat Andrews has obtained a newly-released report from the Marion County Auditor's Office that portend a financial calamity for local government funding next year as a consequence of too much of the county's tax base, approximately 10%, being placed in TIF districts for economic development-related uses. The new data indicates that the base assessments of all TIF districts for taxes payable in 2013, which represents that portion of the assessed property which is allocated among all taxing districts, have plummeted $490 million from $1.56 billion to $1.07 billion, a decline of more than 30%. In the two previous years combined, the tax base declined by $44 million due to declining property values within the TIF districts. That precipitous decline of property assessments within TIF districts contrasts sharply with the total assessed valuation of the county, which increased slightly less than 1%.

This development is particularly alarming because many of these TIF districts have existed for decades, and yet property values within them are declining at a rate much higher than property located outside of TIF districts despite the nearly $100 million in tax revenues invested on economic improvement projects within those areas annually, the exact opposite result that is suppose to occur. Proponents of expanding TIF districts to other areas of the downtown and elsewhere in the county maintain that other taxing districts, such as schools, townships, libraries and the city-county government, are not adversely affected by the establishment of TIF districts because they continue to receive the property tax base that existed prior to the TIF's establishment; only the incremental growth in newly-assessed property above the base benefits the TIF district. The numbers show that the TIFs are actually eating into the property tax base of the taxing districts. The taxing districts affected by the declining tax base for taxes payable in 2013 will experience a tax revenue loss reaching into the tens of millions of dollars.

The data further reveals that fully 17 of the city's existing TIF districts have a base assessed valuation of zero. Yes, you read that correctly. Taxes paid on property located within these TIF districts are paid entirely to benefit the TIF district. The Ballard administration is currently pushing a measure through the Indianapolis City-County Council that would expand several TIF districts, including the downtown TIF district, which already includes significant areas of the downtown. The data shows that its tax base grew only a meager $261,618 for taxes payable in 2013. The taxing district hit hardest by the City's expansive TIF districts is IPS. Remarkably, officials of the school district have remained silent about the pending proposal to expand the reach of TIFs within its taxing district despite the disastrous affect they're having on its tax base. The TIF district to suffer the largest decline in its tax base is the airport TIF, which will hit taxing districts in Wayne and Decatur Townships, including the schools, particularly hard.

UPDATE: Pat Andrews sent a clarification to me so that you better understand what is happening. The property values of the base did not decline by more than 30%; rather, more than 30% of the base got pulled into the TIF districts' increment. "The intent is to ensure the TIF gets as much property tax revenue next year as it did this year," Andrews explains. "This is a one-way street." That's why it is a lie when city officials keep telling us that the property tax base for the other taxing districts is frozen at the initiation of the TIF and property tax revenues from it continue to flow to the affected taxing districts. She notes that the base of 5 of the 6 downtown TIF districts has been driven to zero as a consequence of this shifting, meaning no property taxes collected from within those TIF districts flow to other taxing districts, including IPS. Once those TIF districts' base is driven to zero, the base is never restored as long as that TIF district exists.


CircleCityScribe said...

Mayor, what do you have to say about this?

You are accountable to US, the TAXPAYERS.

Pete Boggs said...

Sea Biscuit can only carry so much passenger.

Gary R. Welsh said...

There is a deliberate effort being undertaken in Indianapolis to starve taxing units of funds they desparately need to operate and then blame tax caps and declining property values for the problem so they can force a choice between a huge tax increase or deep budget cuts. What needs to happen is for the state of Indiana to step in and do what California did and suspend the TIF law, effectively putting them out of business except for paying off debt already incurred. The local politicians have proven that they simply cannot be trusted to use the law responsibly to promote economic development without playing Russian roulette with our local finances. For the administration and the council to even consider expanding TIF districts in the face of these numbers demonstrates that they are either mentally insane or fiscally irresponsible beyond reproach.

Gary R. Welsh said...

The short answer, Chris, is that the TIF law has been bastardized. In theory, the property tax base is established as a floor upon which property taxes are assessed and allocated to the various taxing districts. The TIF district is suppose to get only the incremental increase in assessed value attributable to redevelopment and development that occurs after the creation of the TIF. What is happening is that the TIF is the one being guaranteed a minimum flow of tax dollars and subtractions are made from the base to ensure that the TIF is held harmless. The base of the TIFs has eroded to the point where many of them no longer have a base upon which taxes are levied and paid to the other taxing districts. As a consequence, in those TIF districts, all of the property taxes levied and collected are going to the TIF alone, leaving the other taxing districts with nothing.