by Thomas P. Healy
Quick action by City officials and Midtown community leaders in late 2015 diffused a threat to the Midtown TIF’s ability to stimulate economic development.
The source of concern was an October, 2013 policy decision by the Indiana Department of Local Government Finance which manages property tax calculations for the state. Even though TIF districts are precluded by state law from including gains in residential AV in the increment, the new policy interpretation required the TIF to make up any losses in individual residential AVs even if there is a net gain in residential AV in the district.
So, despite a $3.5 million net gain to the residential AV in 2015 in the Midtown TIF district, the policy deducted $4.65 million from commercially generated AV to offset individual residential parcel losses. If allowed to continue over the 25-year life of the TIF this policy would have rendered the TIF unable to fund qualified new projects and jeopardizes its ability to meet current obligations.
City officials and Midtown leaders agreed that the most efficient way to address the problem was to remove nearly 900 residential parcels from the Midtown TIF district. The move will have no affect on the property taxes of the removed parcels.
A memo drafted by community leaders and submitted by the Midtown Economic Council to the City-County Council and the Metropolitan Development Commission analyzes the problem and outlines the remedy in greater detail.
Both the Metropolitan Development Commission and the City-County Council unanimously approved the proposal and Mayor Greg Ballard signed the legislation into law.
It will take at least a year for the Midtown TIF to recover funds that hemorrhaged during 2015 so the City has adopted a policy that requires developers to purchase any bonds they wish to issue on a given project. This added layer of risk reduction protects taxpayers.