An Indiana Legislative Study has come down hard on the overall economic and job creation impact of Tax Incremental Finance districts.

The study, titled “2015 Indiana Tax Incentive Evaluation,” was conducted by the Office of Fiscal and Management Analysis, and the Indiana Legislative Services Agency. Sold as a way to induce economic growth, the study released in October shows TIF districts experience little growth after the initial impact of creating the TIF district.

“TIF parcels grew by only .03 percent more than their non-TIF counterparts,” said the study. “This difference is economically small and suggests that while TIF parcels exhibit higher growth, they tend to grow only marginally over time compared to non-TIF parcels.”

The study also mentions that job growth in TIF establishments is not significant. TIF establishments tend to create 0.7 percent more jobs than their non-TIF counterparts.

“We find that property values are higher in TIF areas than in other similarly situated non-TIF areas,” said the study. “However, our findings suggest the presence of TIF does not have a meaningful impact on employment growth.”

Marion’s TIF districts brought in almost $5 million in 2013, according to a Marion Redevelopment Commission report, all of that money was used to fund some development in the TIF districts or pay off TIF bond debt. Currently Marion owes $101 million in TIF debt; add interest and the figure goes up to $155 million.

A majority of Marion’s TIF districts provide no property tax dollars for government services like fire and police service, public schools, public libraries, and other government services, leaving some to wonder if TIF has been the wrong method to advance Marion.

“These TIF districts can go on for as long as a city needs money for development,” said Grant County Auditor Roger Bainbridge. “They basically create slush funds that cities can use at their own disposal.”

Bainbridge said you can see massive job growth in a TIF district at first, but that it doesn’t translate to more job creation down the line.

“You want to envision the use of TIF as a financing tool for stage one of a project,” said Bainbridge. “Then the business grows and future stages are not part of the TIF so that the community can reap the benefits of the redevelopment. The problem is we are seeing the other stages of the project are being folded into that TIF meaning the community is seeing no benefit from the growth.”

Ball State Professor of Economics Michael Hicks said that the study shows that in most cases the job growth created would have occurred anyway.

“What you are doing is taking jobs from non-TIF districts and moving them over to TIF districts,” said Hicks. “This is all so that the city can capture that money for its own uses. They aren’t sharing it with tax supported government units at that point.”

With pressing infrastruture needs, city officials and municipal office candidates are faced with the task of conjuring up funds to help repair streets and roads. Schools are also left with tighter budgets, hence the approval of a consolidation plan just this last week. The city is not alone facing issues of gathering money for development. The county has seen its income stagnate as well.

“Property tax caps are affecting our income, and so is our stagnating income tax revenue,” said Grant County Council President Jim McWhirt. “The population in Grant County is declining, and we need higher paying jobs. Once those things happen then we can begin to see more growth in our income tax revenue.”

Bainbridge says he is also seeing cities using TIF for new development instead of redevelopment, something at odds with the idea of TIF.

“TIF is supposed to be used for redevelopment,” said Bainbridge. “It is supposed to take something that used to be there and turn it into something again. It is not meant to start a new project.”

For now Marion will have to live with the TIF districts it has and taxpayers will see much of their property tax money going to pay off TIF bonds.

“At some point the State is going to have to step in and do something about TIFs,” said Bainbridge. “If they don’t the whole State could turn into one. They might come to the point where they have to do what California did, and ban them altogether.”

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