The tax increment financing (TIF) setup partially approved by the Marion City Council Tuesday night is a “rare” TIF deal, according to Buddy Downs of the law firm of Ice Miller, that will guarantee the city hundreds of thousands of dollars a year.

The TIF deal with Central Indiana Ethanol (CIE) has been making its way through various levels of city and county government over the last few weeks. It involves a property to the east of CIE’s current facilities which is the former Omnisource site.

By an 8 – 1 vote Tuesday night the City Council approved expanding an existing TIF district to include that site. The City Council also approved on first reading a $3.65 million bond to be paid off with the TIF revenue.

Council member Steve Henderson, a Republican candidate for mayor, voted no on both measures.

The bond will be used to finance a three-phase CIE expansion project that has begun on the former Omnisource property.

According to Andy Mouser of the city’s financial adviser Baker Tilly (formerly Umbaugh & Associates), the TIF is projected to generate around half a million dollars “right off the bat” in excess revenue that won’t need to go toward bond payments.

Instead that money will be available to the city’s redevelopment commission.

Once a 2013 bond is paid off, the CIE TIF will begin generating around $1 million in excess, Mouser told the redevelopment commission. Once the potential 2019 bond is paid off, the redevelopment commission is projected to receive $1.5 million a year from the TIF.

The planned extra revenue for the city is something city attorney Tom Hunt and redevelopment commission attorney Herb Spitzer said the city has not encountered before in its history with TIF.

“This particular proposed bond issue is different from anything we’ve ever seen here,” Hunt told the redevelopment commission.

Downs said the setup is also unique because the city gets its cut of the TIF money first.

If the property value doesn’t increase as much as expected and the TIF doesn’t generate as much as predicted, CIE will make up the difference to make the bond payments.

CIE is also guaranteeing the city’s share of the TIF revenue, which Downs said was “an additional level of assurance that they will be there to give the city the benefit of this bargain.”

Downs said this “shifts the risk” onto CIE.

Redevelopment Commission President Steve Smithley said he had not yet discussed possible uses for the funds that flow to the city. The TIF area is limited to the CIE-owned properties along Ind. 18.

Henderson said he voted no in part because he doesn’t believe assurances that the city is not taking on any risk with the TIF bond.

“If the company went bankrupt the bond would fall back on the city itself,” Henderson said.

President and CEO of CIE Ryan Drook described the precarious state of the ethanol industry to the redevelopment commission Tuesday, saying that the project the bond will finance will help secure them against the market’s fluctuations.

Drook noted that although CIE has not lost money in the last year, other major ethanol plants have, and several in Indiana are closing.

Henderson said he was “looking out for the taxpayer” by voting no on Tuesday.

He said the revenue captured by the TIF, with its constrained uses, could instead be going to the city and other local units of government in the form of property taxes, where it could be spent on other needs like public safety.

The City Council also voted 9 - 0 to annex the CIE-owned property that is also the site of the TIF expansion.

However, because it is the year before a census, the property will not become part of the City of Marion until Jan. 1, 2020. State statute prevents annexations from going into effect in the year leading up to a census.

The annexation had been in the works last summer but CIE asked to suspend the process while the company was working out the details of the TIF bond, according to CIE’s attorney Jim Beaman.

Because the annexation will not go into effect immediately the property in question will remain county territory for the rest of 2019.

The Grant County Council will therefore have to approve the TIF bond issuance, which they will consider at their meeting today at 6 p.m.

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