TIF Funds Shuffled to Pay UAL TIF(posted Sept 18) There are several tax increment financing (TIF) districts that involve the Indianapolis International Airport and the surrounding area. City County Councilor Bob Cockrum explained the first airport TIF involved Decatur Township to spur economic develop in this primarily bedroom community. The TIF was a tool to attract business development to Decatur Township. Decatur Township's tax base was shrinking due to the IAA buying property as part of the noise mitigation buyout program that transpired during Mayor William Hudnut's administration. At that time, Cockrum was involved in his neighborhood association and did not become a councilman until 1996. He recalled that $11.3 million in TIF bonds were issued. The TIFs are applied to real property, not personal property. He said if tax abatements are given to a business located in the TIF, then the allocation area loses the increment. The theory behind TIFs is that development would not have occurred if the incentives were not given. It was during the last 60 days of Hudnut's administration that United Airlines selected Indianapolis to build its $800 million maintenance facility. The state, city and Hendricks County plopped down millions of dollars for a promise of a $500 million investment from UAL in addition to high paying jobs. Part of the agreement included creating another tax increment financing district. However, the United Airlines deal turned into a nightmare as the economy soured for airlines. The jobs goal was never reached. Cockrum remembers the agreement when the City fined UAL for its job creation short fall of about $14 million. Instead of sending the money to the county council, Mayor Bart Peterson directed UAL to send the money directly to schools and other organizations. The City thought it had covered its bases to recover its costs to attract UAL. According to Cockrum, this included creating a TIF for United employees' salaries to help finance the debt. However, the job shortfall caused that to fizzle as well. He estimated the TIF only produced about $100,000 a year. "The amount was not a big deal," he said. Cockrum said the bond has still not been retired to this day. Only about $2 million has been retired of the $11.3 million. He said the TIF bonds are refinanced as interest rates drops so TIF districts will remain in effect until the bonds are retired. He noted the TIF surplus increments from the original airport TIF is paying off the United TIF bonds. Cockrum emphasized that excess revenue from successful TIFs is shuffled over to pay off under-performing TIF district's debts instead of returning the excess revenue to the schools, library, and township governments. TIF districts receive all of the money from property tax increases in their specific area from the time their base year is established. TIF districts obtain loans based on their projected revenue streams. Because property values generally rise from year to year, TIFs are normally guaranteed a source of revenue from the increased valuation. When assessed valuations of properties fall, TIFs receive less income than in the past. If the valuations fall below the base year, there is no more incremental money. In the minutes from an April 20, 2005 Economic Development Committee meeting of the City County Council, Marya Overby of the Mayor's Office said, "some difficulties of the TIF district are that financing occurs over a long period of time, and it is controversial for the schools, neighborhoods, and townships because they perceive the TIF as taking funds away. One example of this is the United Airlines project. It was initially a good project, but due to 9/11 United went bankrupt. The TIF for development of United will not be paid off until the bonds are paid off." The minutes also discussed the provision that allows TIF money collected in the Ameriplex district to help fund the underfunded United facility bond. The reason for the provision was to avoid the City from using general funds to pay the debt. Department of Metropolitan Development Public Information Officer Angela Nussmeyer explained in general each TIF district is self supporting with its own revenues generated to pay the debt, but she did confirm that Naval Warfare TIF District, located on the east side of town, is helping to retire the UAL TIF bonds. She also noted that abatements are also given in TIF districts. She said in October 2006 Genco Distributions Systems at 255 Transfer Drive, located in the airport TIF district, received an eight year real property abatement. She said when an abatement is given in a TIF district, a resolution is accompanied with it stating "the incremental property taxes are not needed to make payments authorized under IC 36-7-15.1-26, and the designation of the property as an Economic Revitalization area will not cause the Redevelopment District or the City to be in breach of or default under provisions of any bond note, indenture, or other obligations for which incremental taxes have been pledged..". Cockrum said he expressed his concern about the TIF districts and was assigned to a steering committee along with Phil Hinkle and other community leaders to better address TIFs. The committee could not determine a better solution after a two year study. Hinkle said he thought the UAL TIF was created under Mayor Stephen Goldsmith's administration. He does not quite remember the proper name of the committee, but that he had problems with the size of the TIF district. "I raised a concern that it was too big," he said. |
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