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October 03, 2016

Comments

Gene Poole

TIFs / Tax Incremental Fascism are a corruption of legitimate public finance.

Writing this while listening to this evening's gubernatorial debate; it's interesting to note the imbedded / irrepressible tone of statism (intellectual defects) in the two main party candidates; one promoting nebulous or disassociate notions of "international flair" & the other droning on about "living wage."

"International flair" is the little brother syndromic distraction of being like someone else rather than knowing & thereby growing thyself.

"Living wage" is a limited & dead, static notion; pegged to low expectations of a collective.

Natacha

Before expanding the TIF handout scheme, those who govern would be wise to consider what happened in California, where TIFs originated, plus the reason for TIFs in the first place, which those in local government either don't understand, or don't care to learn about.

TIFs were intended to act as a stimulus for properties in areas that are so deteriorated that private investment would not occur. The theory is that if the local government sells bonds and gives the money to private investors to build or improve a property in a distressed area, that the new project would stimulate other private development in the area and bring the entire area back onto the tax rolls at an increased assessed value. The bonds are to be paid back by the increase [increment] in assessed value as a result of the improvement.

Done correctly, it is a good investment for the community because a distressed area is improved and adjacent properties bring in a higher rate of property tax. However, the assessed value of the property subject to the TIF is locked in for the life of the TIF, usually 25 years, despite the fact that the cost of things paid for by tax dollars, such as schools, police, fire protection, etc, goes up during this time. If the TIF property stimulated enough improvements to an entire area, then lower taxes paid on one parcel probably wouldn't matter much.

The limitations on TIFs are increasingly ignored and this tool is being abused, seemingly with the City's blessing. Increasingly, developers are finding ways to get the City to borrow money for their projects that they could finance themselves, using a TIF. Public risk--private profit.

In California, the abuse of TIF became so widespread, and the legislators were so deep into the pockets of developers that it took an Executive Order by the Governor to stop further TIFs. First, it was Swartzenegger, and then Brown continued the Executive Order. Schools were in dire straits with their funding locked in at artificially low rates due to so much property tax being encumbered to pay back the bonds. Eventually, property taxes have to be increased to cover the lost tax revenue. TIFs in California started in the 1950s, so it takes awhile for the results to become apparent.

Let's hope Indiana can learn from California's lesson and stop using TIFs as a way to subsidize millionaire developers. TIFs were intended for limited use--to stimulate development in distressed areas that would otherwise continue to deteriorate, resulting in a loss in tax revenues. There is no place Downtown that fits this description. The line has to be drawn somewhere.

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