Friday, October 05, 2012

Fort Wayne Council Sees Corrosive Impact Of TIFs On Revenues

The Fort Wayne City Council is facing a choice between higher property taxes or deep spending cuts. Yet a TIF fund is sitting out there with a $20 million balance that council members would like to tap. The city's redevelopment director is telling the council members that the law won't allow them to touch the fund's balance to make up the budget shortfall. From the Journal-Gazette:
Thursday’s City Council budget hearing ostensibly was to examine the proposed 2013 budgets for the city’s Community Development and Redevelopment departments.
But it was quickly apparent their $4.3 million and $597,000 budgets, respectively, were not what interested council members.
No, what council members wanted to hear about, in extraordinary detail, was the estimated $20 million in cash balances overseen by Redevelopment, a nest egg that would not only allow the council to eliminate property tax hikes this year without cutting spending but also patch a gaping hole in funding for streets and roads . . .
On the property tax side of the budget, the mayor wants to raise taxes $4.8 million to avoid cutting essential services like police and fire, a move council members are loath to support.
So hearing that there was $20 million generated by Tax Increment Financing districts that hasn’t been used had members salivating at the possibilities.
But what Redevelopment Executive Director Greg Leatherman had to tell them was not what they wanted
But that money, Leatherman said, is restricted. It cannot be used outside that district.
Even within that district, it can only be used for capital expenses.
And that $20 million in cash balances for 14 TIF districts? Almost all already spoken for, Leatherman said.
“What about the interest? How much interest is generated in a year, and can that be used for anything else?” asked Council President Tom Smith, R-1st.
Nope. The interest, by law, stays in the district.
What if a district were disbanded that had a cash balance, say $1 million? Could that go to the city’s General Fund, Smith asked.
Sorry  to hear.

What about ash trees? asked Geoff Paddock, D-4th.

Yes, Leatherman said, TIF money can be used to remove and replace dead and dying ash trees, but only within the TIF district, and most ash trees are in residential areas, not in TIF districts.

He assured council members that whenever possible, TIF money is used for roads or other projects that would otherwise come from funds they oversee, but members who had been hoping to feast went away hungry.

“Well, if you do have anything uncommitted, let us know,” Crawford said.
The Fort Wayne Council should do with these TIF funds what it damn well pleases if it is facing a choice between budget cuts and property tax increases. These funds are nothing but slush funds that allow the mayor to arbitrarily pick winners and losers. Mayors simply make up the rules as they go along as to what they can spend the money on as we've seen time and time again down here in Indianapolis. What really needs to happen though is for the Indiana General Assembly to step in and disband TIFs. Municipal officials cannot be trusted to use this economic development tool. They are decimating the property tax base to the point where there simply are not sufficient funds available to fund basic services. Those officials will always blame declining revenues or property tax caps for their budget woes when their problem is in reality that they've wiped out their tax base with TIF areas. Indianapolis has more than 40 TIF districts that consume over 11% of the tax base. Fort Wayne has 14 TIF districts. California, the birthplace of TIFs, finally had to abolish them because the state could not find enough money to make up for the property tax revenues school districts lost because TIF districts consumed so much of the tax base. Indiana should follow California's lead.

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