Recently, the Fishers Town Council approved several economic development deals that show both how to do economic development in a positive way, and some other deals that not only do not grow the tax base, but may well put Fishers further in debt.
On February 3, 2014, the Fishers Town Council approved a 2-year tax abatement for Ossip Optometry to relocate its flagship store and operations to two buildings on Crosspoint that were largely vacant. In the first year, Ossip would get a complete property tax abatement, paying no property tax, and in the second year, there would be a 50% abatement. This deal gets two mostly-vacant and unproductive buildings occupied, but also moves a thriving business to Fishers with their jobs, and room to grow. This is a great example of exactly how to do economic development. Fishers pays nothing out of pocket, and gets jobs and a great business, and future property tax income. A fine IBJ article on this deal is here.
However, at the same meeting, and some other meetings, the Council approved other projects involving land giveaways and tax increment financing (TIFs) that could actually put Fishers further in debt. TIFs work by a government issuing bonds which are repaid by property taxes from the increased value added by the improvement. In these cases, the revenue generated by the improvements using TIF financing appears to be LESS than the money needed to pay the annual principal and interest on the loans taken out. This seems to be true even when you take into account Fishers' estimated share of County Option Income Tax (COIT) from the jobs estimated to exist in the new development.
Improvements in TIFs do not add to the general property tax base until the bonds are paid off in 20-30 years. And in these cases associated with downtown development, not only is Fishers giving away this TIF money, they are contributing land owned by Fishers, either the open space in front of Town Hall where all the trees were cut down, or other land they have bought, such as the former KFC building at 116th and Lantern.
And this is Fishers' "best case" scenario. If the developments are not successful, then the taxpayers are out even more money. Many communities have run themselves into financial trouble by overuse of TIF financing. And Fishers has put virtually all land which could be developed into a TIF district, which makes it very, very difficult to grow the tax base.
Fishers is promoting projects which look very pretty on paper. But we are killing our own tax base in the process, which can lead to grave trouble in the future. If this makes me more "fiscally conservative" than the people on the council who claim to be "fiscal conservatives" but who are voting for more taxes to support this sort of thing, then I guess I am more fiscally conservative than they are.
There has to be a better way. And they need someone on the council to say, "Wait just a minute."
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The author of this article, Greg Purvis, is a candidate for Fishers City Council in the 2014 election. Visit his website at www.GregPurvis.com, or his Facebook page at https://www.facebook.com/PurvisforFishers. Views expressed are those of Greg Purvis only. Authorized by Purvis for Fishers Committee.
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I think I am starting to figure some of this out.
ReplyDeleteNo doubt about it, the new train station area will be transformation into a first class apartment and retail area. Sure, the property taxes collected will be $295,000 verses $0 with the current train station with the new assessed value (AV) of $13.8 million. It needs to be said this it comes at a cost.
The $11 million bond sale will go towards building a parking garage. The bonds sold will have a cost of $780,000 annually to pay off. It will be paid off in 25 years.
The town will collect parking fees and that is expected to $300,000.
So if we do the math, $295,000(property taxes) + $300,000 (parking fees) =$595,000. This project will not cover the total cost of the debt. Tax revenue $595,000 minus cost of $780,000 = ($184,680)
The bond will be secured with our COIT. The COIT is money we pay on our April, 15th state taxes which is about 1% of our total taxable income. Fishers pledged the COIT as a backup revenue source.
We would like to believe a property would increase in value. Did we already forget what happened in 2008? I believe the city expects 1% every year. If you budget 1%, taxpayer will never see benefit from this development for 20 years. Taxpayers will lose about $137,000 a year in money to support it. This is $3.4 million dollars of taxpayer money over that time that could have been used in other ways. That is really money the Apartment/Retail Company should pay government if we let free markets work.
Fishers has this grand plan for downtown. It is super nice and first class. The plan has all kinds of things you can and cannot do to your property.
We must also remember the theory of supply and demand. Right now, if demand is high for A+ apartment, I am not sure why government should supplement. The incentive should be there just based on that… a business to make what it believes is a sound decision. Although Hamilton Proper just filed bankruptcy. That happens.
And I believe there are “But For” analysis that I bet could be written any way you want depending on what you want.
Fishers made a Tax increment Finance (TIF) area in the downtown. To do this you must form a Redevelopment Commission. “But For” this project, all that added AV would not have happened in the downtown area. I can agree with that.
Now here is the neat thing about this TIF area. The TIF has what is called an Incremental property tax AV. This is the difference between the base property tax AV and the current property tax AC. Fishers can then use this TIF revenues may be used directly to finance public infrastructure, land acquisition, site improvements, and other public improvements. Alternatively, TIF revenues may be pledged to the payment of bonds or lease rental obligations issued or incurred to finance such projects.
DeleteIn 2012, Fishers made that TIF what is called the Downtown Allocation Area. You add up everyone’s property taxes and establish a Base AV. As of March 1, 2012, all total AV in this TIF area was $493 million. That is pretty large to be taking the future natural growth.
Another point to make is Fisher is paying for the new apartment/retail projects with these TIF increments revenues already gained from many companies in the area who developed in the free markets in the past. This is just an observation because I did not seek out all the incentive given these companies just off I-69. It could have been a past TIF too for all I know.
The city can lead us to believe it is paid for with new investments we attracted. These investments are driven by Fishers and the plan. I could debate that claim. Did Target locate in this downtown because of the plan or I-69? And you used Target increment didn’t you for the beginning of this plan? This money could have been used today toward schools, parks, roads, sewers, etc. The increment now get funneled into other business.
Now I am not sure how this Train Station deal happened without a bidding process. Indiana law says, “most notably the public bidding law and the prevailing wage law.” So maybe they get bids when they build the city own garage and this is not specific to the projects creation.
DeleteI have had a chance to look at the downtown plan I once ignored. The kick-off is very attractive. The current projects do not appear sustainable and will not benefit the city until after 25 years. I can admit some selfishness. In 25 years, I will be retired in Florida, Arizona or Southern California. I would rather see my money used today for schools, parks, etc.
Ok.. here are the projects..
The Depot.. Will cost Fishers Taxpayers until after 25 years. A $42 million apartment-and-retail $15 million bond issued and government owned land worth well over a $1 million.
The Train Station… Will cost Fishers Taxpayers until after 25 years.. A $32 million apartment-and-retail and estimated $11 million bond issue, a building that serves a purpose and might now need taxpayer money to replace. Government owned land worth well over a $1 million.
The old KFC property… $17.5 million mixed-use building $6 million garage and bond issue. The garage is not sustainable.. The cost on that is $500,000 per year and I would assume the garage revenues might be under that. We will probably collect in property taxes about $250,000 a year and maybe get $250,000 in parking fees so this one will not benefit until 25 years later.
Meyer Najem a $5.5 million office building gave them $1 million worth of property. If you cost this out over 25 years our payment for the land is about $70,000 per year. At least we will get $120,000 in property tax revenue but this is no “wow”.
But we will get more sales taxes. I cannot even guess what that will be.
We can call all these garages infrastructure like a road, sewer, etc.. If you look at the I-69/106th interchange that will cost taxpayers $25 million. The City will pay $8 million. Perhaps this will increase the chances more nice office building will be built and add to one of those AV. It will nice to not fight the exits off 96th or 116th. But it was not that big of a deal.
DeleteLet’s take the Cmg Worldwide Inc business just off I-69 and 106th. They are in a TIF. They pay about $9,500 a year in Property taxes. The TIF will get $8,200. I don’t believe this goes toward our biggest asset, our schools. This will be used to attract more business in that TIF area.
If the City leaders will hold firm now on negotiations, I believe we might get business to come without needing to supplement in these TIF areas. The areas will be very nice. Let future companies pay for their own parking. Let them charge a user fee should someone park there. Let them decide if a customer gets free parking. Then take that TIF money and use it toward the general fund.
After all, in fairness, should government now pay for parking at every business that wants to come to Fishers? Inside the TIF or not. I suppose this is the new role of government.
“Money won't create success, the freedom to make it will.” Nelson Mandela
The TIF is a value not what Nelson Mandela quoted. Free Markets are being trampled with a government value of “they” create jobs. I once thought the GOP had this value, but the money has taken them into a different value. TIF’s divert taxes from the people to business. They are sold on the bases of a hamster wheel philosophy.. of chase, chase, chase, grow, grow, grow. They attract business in the best interest of business, not the people. You bet we are sacrificing today for tomorrow.
All the very successful business I know grew slow and steady, rarely taking huge risk, but smart risk.
The TIF method has been discontinued in the state it began in, California. Why? All good things must come to an end.
Fishers is one of the fastest areas in the state and I think much of it was done on a smart philosophy.. Luck being around I-69, the type homes we built.. maybe a few other things.
DeleteLet’s look at life “Given”, something at will happen. People are not always loving or loyal. When you use money as incentive, you are going to attract some not so good people and bad business deals. And we are not going to know who these people are. We didn’t even know who Fishers Town Councilman Charlie White was.. Morally corrupt. Look at Fishers resident, Tim Durham. The greed and selfishness. Todays, Indy Star reports Fishers Company DECA bankrupt under misconduct allegations. I hate to say it, but Look around, one of three people are not so loving and the loyal type. It’s not easy to see who.
And most important, we should be paying very close attention to Carmel. I will point out a March 15, 2014 article in the IBJ , “The cash-strapped Carmel Redevelopment Commission”. At the rate we are going, I really believe that is going to be us. We don’t have to be like Carmel. Fighting, lawsuits, money shifting to favorite projects.. on and on.
A community can choose to be attractive with low taxes, good streets, nice parks, making sure all maintain beautiful properties, and good schools. We pay for those with property taxes, income taxes and sales taxes. Good steady growth and the right pace. We are well located.
I am not sure the TIF is the best way. TIFs take a community out of balance, more favorable toward business.
I think the key to Downtown Plan today should be not to finance much more right now. Not to overpay those properties in the area with government money and let’s see what does get attracted without giving these companies subsidies. Although I still have questions and I don’t have answers.. like where will the future TIF increment money go? I want to say my Councilman David was most generous to meet personally with me. I suppose it would take a book to write out so he wanted to explain how all this works. I look forward to meeting him at the Meet the Mayor.
Too me, if we wait, the proof will be determined when a company says.. hey, I will be the first to invest without taxpayer money. But If it were me, I dangle the carrot and get something. Buy me parking.
When they say future.. wow, they really mean way out. Perhaps I am wrong.
I think TIFs should be against the law. They take away freedoms and Free markets. I get too we are in competition with the surrounding communities, of which, I say, Let them be “that” and let us be us. If we didn’t have TIFs Taxpayers would not pay the bad consequences that have proven to come from them.
California, where TIF financing started about 60 years ago, has now outlawed TIFs because of their misuse and abuse.
DeleteRegarding these developments, here's my take:
ReplyDelete1. This was prime, prime land in Fishers. It should never have been given away. While I would have preferred that it remained and open and somewhat green space, if it just absolutely had to develop, Fishers should have sold to the highest bidder, not given it away.
2. We have far and away enough apartments and retail space in this city, in my opinion. The last thing we needed was more of these, for many reasons. But- if a developer is will to risk their own judgment, and more importantly, their own money, so be it. The people should never subsidize housing or retail.
3. Good grief, but these things are UGLY so far. I understand that they are not finished, but what monstrosities. If someone was setting out to destroy the character of the center of the town we all had chosen to live near to, well, good job!
4. If government needs to get involved with steering development (debatable at best), then do the kinds of things that will grow the tax base immediately and more permanently and attract corporate HQ's, light industrial concerns, warehousing and logistics (see that Interstate over yonder?).
Greg, you are 100% on the mark regarding supply & demand. The world must be upside down, because local Democrats are sounding this alarm, and the Republicans seem to be wholly unaware of the concept. I'm glad you're making the case.