Who is this TIF anyway?

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“How are we going to pay for it?” asks a concerned resident as visions of high property taxes dance through her head. “Don’t worry. The money won’t come from tax payers. We’re going to use TIF!” replies an optimistic growth proponent….

If you’ve been listening to city council meetings (or stalking people diligently on Facebook) these days you’ve probably seen the acronym “TIF” being used quite a lot around Charlestown. With recent expansions of the town’s Tax Increment Financing (TIF) districts in anticipation of growth inspired by the opening of the east end bridge and development in River Ridge, it is important that we all know how a TIF district impacts us.

If you already know what a TIF is then feel free to scroll past this next paragraph. But if you don’t, then read on…

When a community designates a TIF district they freeze the assessed value of all non-residential property in the area for a specific amount of time (20 years is a popular number). It’s that assessed value that that determines how much property tax a business pays. As new businesses enter the area more property taxes are collected, which are intended to be used to fund development within the district. In order to entice developers to take the risk in the first place, cities take on bond debt under the belief that,

as businesses come…

and money comes in…

they’ll be able to pay off the debt later.

TIF districts began in California in the 1950s as a way for cities to participate in urban renewal projects. They arrived in Indiana in the 1970s and were originally limited to areas defined as

“blighted.”

Since 2005, Indiana towns have been able to establish TIF districts more broadly anywhere they determine

“an area in need of redevelopment.”

These new standards have prompted several cases of TIF abuse as communities apply the financing strategy to otherwise healthy areas to make up for state enforced caps on yearly tax spending.

Here are some things to note about TIFs:

Pros:

  • TIFs create opportunity for cities to self-finance redevelopment
  • TIFs are highly flexible – they are not capped the way regular tax revenue is capped
  • TIFs shift the risk to bondholders

Cons:

  • TIFs freeze tax bases and overlook services needed to manage additional growth. If you build it…

and they come…your city and county governments,

schools, police and fire departments, libraries,

parks, township trustees, road crews,

and sanitation departments,

all have to continue to function without the additional property taxes generated in the TIF districts. To meet the needs of their growing communities, these entities are forced to cut services or raise taxes on all of us.

  • TIFs assume that all monetary increases come from the redevelopment they inspire. They don’t take into account other market forces that increase property value.
  • TIF bonds are attached to higher interest rates than standard loans because their risk of repayment is based on the success of the development. So cities that take out bonds for TIF repayment end up paying more on that money later.

Now you might be asking…

Why does all this matter?!?

Redevelopment in Charlestown is being funded by TIF.

Springville Manor, Pleasant Ridge Redevelopment , and the proposed Sports Complex (courtesy of a public/private partnership with Klipsch-Card Athletics) would all be supported by TIFs.

Let’s look at the Sports Complex as an example. The facility built by Klipsch-Card in Noblesville has been used as an example of the company’s success. The city of Noblesville pays

$800,000 annually for 20 years (that’s $16 million)

in order to hold that facility.

  • $300,000 is paid to the facility from a TIF on the building itself
  • $300,000 is paid to the facility from user fees
  • $200,000 is paid to the facility from a TIF on businesses in a second TIF district

This is Klipsch-Card’s go-to sales model. In Bargersville, the group asked the city to pay $950,000 per year for 20 years ($19 million). Bargersville examined their budget, found the money lacking, and

decided to meet their needs rather than their wants,

 and rejected the proposal. 

We can also turn to Springville Manor. On Tuesday, September 5, the City Council of Charlestown adopted Ordinance 2017-OR-12 granting permission for the City to acquire bonds in the amount of $2.5 million for Springville Manor, LLC (see my blog from that day). Let me say, nobody wants to deny the elderly a place to live. That’s not the critique here. The rub is in how the process is happening.

Although Mayor Hall said the bond money is allocated for the homes at Springville Manor in the Council Meeting on 09/05/2017, the Ordinance suggests room for modification. The Ordinance mentions funding for an

“economic development facility”

without defining what an “economic development facility” is. It also mentions that repayment can happen from “certain other revenues of the city” without fully explaining what these revenues are.

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This is an expensive project. Look at the numbers in the amortization chart. In the end, the City will pay

$4,502,793.96

for that $2.5 million bond. We should not take such expenditures lightly when they are shrouded in speculation and uncertainty.

 

Are TIFs ever a good idea?

In order for a TIF to be successful, academic literature shows that it must…

  • be targeted and temporary
  • hold developers accountable for the money they receive
  • be fully transparent

Studies show that TIFs work quite well in industrial areas, among non-minority communities, and in their early years while the building boom is fresh. BUT…studies also show no evidence that TIFs bring higher employment.

Employment increases in a TIF district come at the cost of lower employment from outside the district because they don’t attract new people, they just shuffle the existing people around.

Also, they don’t always attract high-paying jobs that would improve average household income.

TIFs also shuffle the financial burden around. Because TIFs divert money from the City’s General Fund, they fail to decrease your tax burden.

closeupportraitwomanholdinggiftinonehandshutterstock_190779821Think of it like a gift. If five people are going to buy a gift for their boss that costs $100, then each one contributes $20 and all is fair. Now imagine that the company grows and there are 10 people who could contribute to the gift – except that they weren’t grandfathered in so they don’t.

You still have five people paying $20 when you could have 10 people paying $10 each instead!

Meanwhile…the cost of the gift rises a little each year…

TIFs take money away and enable the city to use it in potentially abusive ways

(more to come on that).

So…

  • If a city masks its use of TIF districts to fund projects
  • If a city lacks total transparency in planning and financing
  • If a city promises you that TIF redevelopment will bring jobs

You should think very carefully about what is happening.

When Bargersville’s town council turned down Klipsch-Card last year, the athletic management group moved on to other cities. Andy Card quipped,

“If you’re not interested, then others are.”

And he might be right…because now they’re knocking on Charlestown’s door. How will we answer?


Sources for this post:

Annie Goeller, “Sports complex owners asking for $950,000 a year from town,” in Daily Journal, September 9, 2016.

Baker & Daniels, LLP, “Tax Increment Financing in Indiana” (undated).

Charlestown City Ordinance 2017-OR-12

Chris Sikich, “$15 Million Sports Facility to be Built in Noblesville,” in IndyStar, November 29, 2016.

Martina Webster, personal communication from August 31, 2017.

Paul F. Byrne, “Determinants of Property Value Growth for Tax Increment Financing Districts,” in Economic Development Quarterly, vol 20.4, November 2006, pp 317-329.

Paul F. Byrne, “Does Tax Increment Financing Deliver on its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth,” in Economic Development Quarterly, vol 24.1, 2010, pp 13-32.

Rob Kerth and Phineas Baxandall, PhD, “Tax-Increment Financing: The Need for Increased Transparency and Accountability in Local Economic Development Subsidies,” U.S. PIRG Education Fund, Fall 2011.

Tom Heller, “Economic Development: Indiana’s Wobbly TIF Law,” in Indiana Policy Review, August 10, 2013: http://inpolicy.org/2013/08/2245/.

Open the Doors and See all the People

Pleasant Ridge made the news again this week. For those familiar with Charlestown this is no surprise. Once again the community finds itself in the spotlight of controversy and once again voices call for its destruction with justification that tearing it down will restore some sense of ‘public good’ to the area.

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 “I know it’s not politically correct to say this, but when you have a low-rent district, it invites people who are not contributing to society,”

– Mayor Bob Hall testified in a hearing that took place in Scott County on Friday, September 1.

What happens to a town when its leadership sends these messages?

Pleasant Ridge has been on the community radar for several years now. Ask anyone walking down the sidewalk in Charlestown about the neighborhood and they probably have an opinion. Residents who do not live in Pleasant Ridge watch the news and see messages from City leaders and base their opinions about the community on what they see and hear. Some might even cite statistics or sources to support their opinions.

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Naturally, when they see and hear stories that highlight dangerous or deviant behavior from the community, it becomes easier to agree with leadership and view Pleasant Ridge as a blight on the face of our community.

The two news releases about Pleasant Ridge this week have prompted folks once again to cry out against the…

“nasty ass”

“drug infested” neighborhood that is

“full of illegals” who

“walk around like zombies.”

Since Charlestown designated Pleasant Ridge as “an area in need of redevelopment,” many arguments have been made in favor of tearing down the entire community and rebuilding to attract a better different population. Certainly nobody wants to ignore an area where crime rates appear higher than average…

…but are we asking the right questions about Pleasant Ridge?

  • Are we asking what social conditions influence people to move into low-rent districts?
  • Are we questioning how we rank crimes on a hierarchy that positions blue-collar offenses as somehow worse than white-collar crimes?
  • Are we looking at all of the ways that revitalization can occur in areas that need it?
  • Are we asking the people of Pleasant Ridge what resources they need to empower them?

Michelle Martinez rented in Pleasant Ridge for 19 years because keeping her rent low enabled her to provide more educational and extracurricular opportunities for her children. Michelle’s third-shift job at NIBCO provided a steady wage that enabled her to shop at local businesses and pay her bills. Had she sacrificed more of that income on higher priced housing, Michelle’s youngest daughter might have had to forego her gymnastics lessons that keep her physically fit and socially engaged with her peers. Because of the extra support she received from her mother’s commitment, Michelle’s oldest daughter graduated from Charlestown High School with honors and has since enlisted in the Army and volunteered for deployment to serve her country. What better way to contribute to society?

Crystal Hébert rented in Pleasant Ridge for thirteen years. During that time she and her husband remained employed and met their financial obligations. They paid taxes, shopped in Charlestown, and were active members of their church. Crystal’s family knows how to help those in need. In addition to volunteering and donating to help support local relief funds, Crystal’s children regularly rushed to help their elderly neighbors unload groceries or maintain their yards. Crystal’s pride in her community is only surpassed by the pride she has for her children including a son who will soon graduate with honors and who has received numerous scholarships to continue his education.

Kristina Neff admires Charlestown for many of the same reasons all of us do. After living here for 19 years and renting in Pleasant Ridge for nine, Kristina says she still loves the town because “it’s quiet and nobody bothers you.” Kristina is happy to have her children attend schools in Charlestown and loves how the community pulls together to support kids and families.

Although these three women provide only a snapshot of the types of people attracted to the “low-rent district” of Pleasant Ridge, they speak in sharp contrast to the images often painted of the community. Dozens of homeowners also love and deeply value their neighborhood.

So when we, as a community, are looking at possible “revitalization” projects, we need to remember the individuals involved. We need to remember that we are not talking about objects, but People. Redevelopment MUST be more than rebuilding!

We owe it to the People of Charlestown to explore all possible alternatives for helping those in need.

Drive through Pleasant Ridge. (I do on a regular basis because a dear friend lives there and I sneak by her house to make sure she’s ok.) But when you drive through, go slowly. Because you WILL see people out on the street…playing basketball…walking their children in strollers…laughing at a neighbor’s joke…working in their yards…

But you must look. You must look past the objects. You must look at the People.

Better yet…try talking to some of them. Do not be deceived…

After all, the first lesson I learned when I moved here is that Charlestown has never been about buildings…it’s about people.


Sources:
“Mayor defends enforcing city code: Denies Pleasant Ridge residents’ accusations,” by Kirsten Clark in The Courier Journal, Saturday, September 2,, 2017
WAVE News Release “Pleasant Ridge Resident Arrested for Threatening Charlestown Mayor,” September 5, 2017
Personal interviews with prior and current renters of Pleasant Ridge – names and details published with their permission.

Charlestown City Council Meeting 09/05/2017

Charlestown Council Meeting – 09/05/2017

Meeting called to order 6:30 PM by Mayor Bob Hall.

Pledge of Allegiance led by Brittney Miller, student at Indiana University Southeast

Invocation led by Neyland McClellan from North Charlestown Church of God

Determination of a Quorum was made and roll call consisted of all council members in attendance.

Mayor Hall entertained motions to approve the agenda for the evening:

  • motion made by Ted Little
  • motion seconded by Eric Vaughn
  • passed unanimously

Mayor Hall entertained motions to approve the minutes from the previous council meeting on August 22, 2017:

  • motion made by Eric Vaughn
  • motion seconded by Mike Vaughn
  • passed unanimously

Mayor entertained motion to pay the claims:

  • motion made by Brian Hester
  • motion seconded by Eric Vaughn
  • passed unanimously

Mayor entertained motion to accept the payroll allowance docket from 08/20/2017 to 09/02/2017:

  • motion made by Ted Little
  • motion seconded by Eric Vaughn
  • passed unanimously

Public comment made by resident Treva Hodges, 339 Oriole Drive. Spoke on ordinance 2017-OR-12 and asked council to table the decision until more public input could be received. (Link to full text provided below)

Mayor Hall issued comment following and clarified that the $2.2 million loan and $2.5 million bond are the same fund. He offered clarification in the following breakdown: $800,000 for construction, the reminder is dedicated to the $20,000 per home forgivable note and $35,000 loan that will come back to the city. He said they hope to get the financing approved through a credit line to reduce interest costs. He also noted that some residents of Springville Manor have elected not to use the $35,000.

Old Business:

  • Susan Riley Pathway to Home Ownership Update – not issued, Susan Riley not in attendance

New Business:

  • Ordinance 2017-OR-12 (Bond Ordinance) – Mayor entertained motion to adopt
    • motion made by Eric Vaughn
    • motion seconded by Ted Little
    • passed 4-1
      • Ted Little – approve
      • Brian Hester – approve
      • Mike Vaughn – approve
      • Tina Barnes – opposed
      • Eric Vaughn – approve

 

  • Public Hearing on 2018 Budget was opened by Mayor Hall – no comments made

 

  • Ordinance 2017-OR-13 (Salary Ordinance) – establishes salaries for city employees (non-elected positions). Only change was a $500 raise for employees. Mayor entertained motion to consider:
    • motion made by Brian Hester
    • motion seconded by Mike Vaughn
    • during open discussion Tina Barnes noted a potential error in the increase amount for Parks Director, Rhonda Davidson. Davidson’s raise was listed as only 1 cent. After a brief pause for document verification, Mayor Hall ensured that her new rate of pay will be $716.21.
    • During this discussion Mayor Hall asked if the council had copies of the Ordinance 2017-OR-14 for the budget discussion that will occur at the next meeting. Council members did not have copies so during the brief pause, copies were made and distributed to council members. Mayor Hall asked council members to let him know of any questions they have about the budget as they review the document.
    • passed unanimously

Mayor entertained motion to adjourn meeting:

  • motion made by Eric Vaughn
  • motion seconded by Mike Vaughn
  • passed unanimously

Meeting adjourned.

For full text of public comment click here: 09.05.2017 public comment – By Treva Hodges

Click here for audio of the full meeting: 

City Council Meeting 08/31/2017

Tonight the City Council held a special meeting to consider Ordinance NO. 2017-OR-12. Following is the written account of the meeting:

Mayor Hall welcomed everyone to the meeting.

Council member Tina Barnes led the Pledge of Allegiance

Roll Call

  •             Ted Little – Absent, on vacation through September 8, 2017
  •             Brian Hester – Present
  •             Mike Vaughn – Present
  •             Tina Barnes – Present
  •             Eric Vaughn – Present

Mayor announced that the only item on the agenda was consideration of ordinance 20017-OR-12 and entertained motions to adopt the ordinance.

Motion to adopt the motion made by Eric Vaughn

Motion seconded by Mike Vaughn

Mayor Hall asked for any Open Discussion. No open discussion occurred.

Votes –

  • Ted Little – Absent
  • Brian Hester – In Favor
  • Mick Vaughn – In Favor
  • Tina Barnes – Opposed
  • Eric Vaughn – In Favor

Motion passes 3-1. Will be on the agenda for the next meeting Tuesday, September 5th, 2017.

Mayor entertained motion to adjourn.   Motion to adjourn made by E. Vaughn. Motion seconded by Brian Hester

Meeting adjourned

Click Here for the full ordinance: CCI31082017

Click here for audio of the meeting: