Wednesday, February 5, 2014

How to Kill Your City's Tax Base

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.