Picking Winners and Losers

Conservatives often talk about government not picking winners and losers. By that I suppose it is meant that government should not advantage some citizens over others, at least not unnecessarily. But a quick look around Hamilton County shows that our local governments do exactly what they profess not to support.

When a city offers tax incentives, or even free loans, to a business to move in, they advantage that business against those in the same market space which are already there. Worse, when the incentive is Tax Increment Financing (TIF), the property taxes go to pay the debt for the loan the city took out to provide that incentive, but don't go for core services, police, fire, libraries, roads, and yes, schools. Who picks up the difference?  The people who didn't get the incentives, chiefly homeowners.

At a minimum, this is blatant hypocrisy. It may also be largely unnecessarily, and in the case of Carmel and Fishers, excessive. Further, not all of the projects that at one time or another gain favor and at least the promise of incentives ever work, and many don't get off the ground at all.

Fishers, the city where I live and know the most about, is littered with failed projects backed by town, then city, government and totally failed.  A short list:

• Riverplace, the proposed multi-use development on the northwest corner of 96th and Allisonville.  
• The 96th and Allisonville "Michigan Left". Fishers spent $10 million, including cost overruns, for this project, "needed" in part due to the added traffic from Riverplace (see above). You now have to go thru 5 sets of traffic lights to turn left.
• The water park at SR 37 and 131st.  Some ground work was done, then it failed and the property was foreclosed, then redeveloped. 
• The auto mall on the west side of SR 37 and north of 131st. An additional turn signal and road was put in for this, and placed in a TIF district. Never got off the ground, and city administration quietly took the property out of TIF. 
• The Saxony sports complex.  A novel idea with too little financial backing, which caused some concerns about traffic and parking. Eventually their financing failed due to appraisal issues.
• Bub's Burgers downtown Fishers location. The Carmel burger icon's proposed second location, near both subsidized and non-subsidized eateries, was ballyhooed by city administration, then it quietly dematerialized. 
• The 2007 proposed redevelopment of downtown. Town Council promised $40 million in incentives, but the developer went broke and filed bankruptcy. Honestly, it was a good thing, the design was ugly and it would have displaced numerous local businesses and a school. 
• A proposed real estate building on Maple St. just north of 116th. The former building was torn down, then the real estate company had second thoughts. 
• The strip mall at 116th and Hoosier Rd. Much fought-over for years (it was the crux of the famous "flying gavel" council meeting years ago), it went thru various developers, who have only ever managed a day care and a Fresh Thyme market, the rest is vacant. 

If you have philosophical issues with this, fine. But the party that runs Hamilton County all CLAIM to be "conservative" then do this. On a more practical note, Carmel now has over a BILLION DOLLARS in debt, and rising, and Fishers has at least a quarter of that, all of it incurred since 2007. As I noted before, it is homeowners who primarily shoulder that burden, and it is a partial factor in schools seeking referenda to approve tax hikes. Whatever your party label, this should be in the mind of all residents.  Pay attention people!

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. 

TIF Districts: Part I, What is a TIF district?

There has been a lot of debate recently in many communities over something intended as an economic development tool, called "TIF Financing" or "TIF Districts".  This is a debate that has raged in Carmel, Indianapolis, and more recently, Fishers.

But what is this thing called "TIF"?  That is an abbreviation for "Tax Increment Financing".   Basically, the appropriate element of government in charge of economic development establishes a "TIF District", that is supposedly in need of either economic development, or re-development.  It was originally intended for blighted areas, but the actual use has expanded far beyond urban blight.

The way it works, is say ABC Developer wants to build a $50 million dollar project, but they want help from the local government as an incentive to build in an particular community, or area of the community.  The local government can sell bonds to help the developer.  These bonds are repaid by the taxes on the increased value of the TIF district, above what the base value was prior to the development.  In fact, the taxes on the increased property value go ONLY for repayment of that debt, until it is retired.

And that is one of the controversial issues with TIF Districts.  In this case, economic development DOES NOT ADD TO THE TAX BASE, and doesn't go to other units of government that depend on the tax base, such as schools.  And many of those bond issues are pretty long-term.  So if TIFs are over-used, one of the negative side effects is to harm school financing.

Complicated, isn't it?  And the Town of Fishers has actually posted a pretty good short brochure about TIF financing, which you can get here:  http://www.fishers.in.us/egov/docs/1326921651_105590.pdf

As communities compete for economic development, TIFs are one of the tools they use.  But they can be quite controversial.  An IBJ article this week shows the strong arguments that have arisen in Carmel over use of economic development incentives in general, and TIFs in particular.  http://www.ibj.com/carmel-panel-refuses-to-back-midtown-redevelopment-plan/PARAMS/article/41626.   Similar arguments have waged for some time in Indianapolis, and are of more recent discussion in Fishers, which will be the subject of a future article in this series.

So what is the proper role of government in using incentives for economic development, and TIF districts in particular?  There are many differing views, and some of those will be explored in this series.  I hope this provides food for thought in readers concerned about their community's development.