SOUTH BEND, Ind. (AP) — Revenue from special tax districts originally created to help redevelop economically depressed areas will flow away from local governments in coming years under a new Indiana law that sets limits on the districts.
The law approved in March applies to tax increment finance districts created on or before May 31, 1995, or legacy districts.
Under current law, districts created before July 1, 1995, never expire. Those created later have 30- or 25-year expiration dates, depending on when they were formed.
The new law, which takes effect July 1, requires all legacy TIF districts to expire June 30, 2025, unless they are repaying bonds issued before July 1, 2015. Those districts expire June 30, 2040.
“We’re trying to get back to the original purpose of tax increment finance,” said state Sen. Pete Miller, R-Avon, the author of the bill that led to the changes. “The intent is that you are enabling the creation of assessed value that otherwise would not have occurred.”
Lawmakers say that, too often, the districts have become redevelopment slush funds that governments tap for lavish projects such as a 1,600-seat performing arts center in the Indianapolis suburb of Carmel.
“Mayors figured out they could create a cash cow that gave them millions of dollars to spend at their discretion,” South Bend Common Council member Dave Varner told the South Bend Tribune.
Mishawaka Mayor Dave Wood said he understood that the districts had been misused in some places, but he is worried about how the loss of funds will affect his city.
He noted that Mishawaka has committed to spending $3.36 million in TIF money each year for the next 20 years to pay for a $160 million sewer project. Without that money, the city might have to increase sewer rates, he said.
Wood said the city could borrow money to pay for the sewer project, thereby extending the life of the TIF, or could appeal to the General Assembly to change the law.
Scott Ford, executive director of Community Investment in South Bend, said the new law will affect revenue from TIF districts near the airport and downtown. The two combined generate about $16 million in annual revenue.
The city has tapped both funds recently for projects including an ethanol plant, the redevelopment of the LaSalle Hotel downtown and corporate expansions.
Ford said having redevelopment funds on hand allows the city to act “at the speed of business” when presented with an opportunity. Losing that money will affect the city’s ability to compete, he said.
“It’s going to have a dramatic impact on our approach to redevelopment,” Ford said. “We’ll have to refine our tools and adapt.”
While government leaders are unhappy at the prospect of losing funds, some entities are applauding the move. Schools, libraries, townships and other organizations will see more money flow to their taxing units as a result of the change.