NEW ALBANY —
The fresh pavement on Daisy Lane, the businesses fed by an expanded Charlestown Road and the downtown bank buildings that top New Albany’s skyline all have something in common — they were driven by tax-increment financing.
At least that’s the angle Mayor Doug England pitches when talking about allocation areas for the collection and disbursement of property taxes, or TIF districts.
“I’m very supportive of TIFs,” England said. “We have so many projects happening because of TIF.”
England was the first mayor to begin implementing TIF districts during his first stint as mayor in the 1990s. He credits the tool for drawing businesses and jobs to New Albany, including the Kroger superstore on State Street.
It was one of England’s first TIF projects, and the increment paid for drainage improvements that encouraged Kroger to build along State, England said.
Carl Malysz, deputy mayor and director of development for the city, said the commercial growth along Charlestown Road beginning at the Interstate 265 interchange wouldn’t have been possible without the improvements funded by TIF.
Kohl’s, the Northside Christian Church campus and the Purdue Research Park likely would have located elsewhere if Charlestown Road hadn’t been stretched to four-lanes, Malysz said.
The downtown TIF funded the State Street parking garage which enticed Your Community Bank and Chase Bank to build nearby, according to Malysz. Economic Development Income Tax funds were also used to pay for the garage.
Then there’s the Daisy Lane project — which is halfway through four scheduled construction segments — to add sidewalks and resurface the roadway that’s also being funded by TIF.
The Grant Line Road Industrial Park and Park East Industrial Park TIF districts are among the most important to the city, Malysz said. That’s because the upgrades they funded have kept industries and jobs in New Albany while also enticing new companies, he continued.
“How could we have done that stuff without TIF? We wouldn’t have had the money,” Malysz said.
But with New Albany sewer customers waiting on the City Council to decide if they’ll be forced to pay a higher rate for service, some are suggesting TIF funds should be used to subsidize the utility.
Councilman Dan Coffey accused the administration of misleading the public by underestimating the impact TIF could have on sewer rates.
“TIF is supposed to benefit the community as a whole,” he said. “It could ultimately lower the rate increase, therefore TIF will benefit everybody.”
For 2010, $870,000 in EDIT funds are pledged to the sewer fund. A TIF district could be called upon to cover a sewer project, but the improvements would have to serve the community within the boundaries of the TIF zone.
It wouldn’t be the first time TIF has been used for sewer infrastructure. A lift station was improved at a cost of $900,000, $450,000 of which was TIF money.
But Malysz said each council member would have to consider the projects in their districts that would be sacrificed if TIF money was redirected from its current designation.
The increment from the districts is fueling improvements that could never be funded otherwise, Malysz said.
“Are we better off using those jobs to entice job creation or are we better off using those funds to improve a lift station,” he asked. “There are choices to be made, and different choices have different ramifications.”
Coffey said the state allowed cities to use TIF for sewer projects when they setup the allocation areas, so he’s not alone in believing the funding wastewater construction with TIF can be a good choice.
With New Albany residents struggling in a weak economy, keeping sewer rates lower with TIF money makes sense, Coffey continued.
While the state did lay the framework, Amanda Stanley, communications specialist with the Indiana Department of Local Government Finance, confirmed that the establishment and administration of TIF districts is a local function.
“TIF can induce capital investment that otherwise may not have occurred in an area and provides a financing tool for development,” Stanley wrote in an e-mail.
Anatomy of a TIF
Either for redevelopment or economic development purposes, a TIF area can be declared at the behest of the Redevelopment Commission with approval from the city council.
As their names suggest, a redevelopment TIF is designed to fund projects that will lead to empty buildings and abandoned properties being used again and put back on the tax roll.
The other TIF category, economic development, typically stimulates new development.
“In a generic sense, redevelopment projects are more difficult to implement,” Malysz said. “New development is easier to facilitate and regulate than trying to flip something that’s a problem to something that’s acceptable.”
Once a TIF district is established, the assessed property tax rate freezes. The collections from that existing property tax value continue to go to the city, county or school district they were intended for.
Loans are then usually taken on by the entity managing the TIF to make upgrades to streets, sidewalks and other infrastructure.
In theory, improvements are made and then businesses start to locate to the TIF zone. As a result, property tax rates rise in the district, and the increment goes to the TIF account.
“There’s a misnomer out there by people that are antagonistic to TIFS,” Malysz said. “They say it’s taking money out of the general fund. That’s a complete and utter falsehood.”
New Albany has seven TIF districts: State Street, Grant Line Road Industrial Park, Park East Industrial Park, Old Monon, Downtown/Parking Garage, Charlestown Road and Loop Island.
Would values have increased without TIF?
The England administration holds firm that TIF projects — especially major road improvements — would be impossible to fund locally without the increment.
And without those projects, property taxes wouldn’t have risen based on increased value, Malysz said.
Engineering is being completed now for a widening of Mount Tabor Road and McDonald Lane. Eighty percent of the funding is coming from the federal government, but it requires a 20 percent match.
The city is calling on TIF funds to satisfy its end of the deal.
Draining the Charlestown Road TIF of its funds for another use, such as subsidizing sewer costs, would likely end New Albany’s chances of having 80 percent of the road widening paid for, England said.
“You start taking money away from that, and you have to cancel that project,” he said.
Coffey doesn’t disagree that worthy projects have been accomplished with TIF funding. But he differs with the administration on how long a TIF should last.
“If you look at the TIFs, after the initial projects are done, the TIF is supposed to go away,” he said.
With the TIF hold removed from the increment, the added tax value would pad the city’s general fund, Coffey continued. But he feels the administration is taking care of developers and big businesses by leaving the TIFs in place.
“Every time they get close to paying off a bond, they bond out more and pay for something else,” he said.
Coffey once sat on the redevelopment commission, but stepped down last year over disagreements with the administration on some of the projects the board was pursuing.
What about Jeffersonville?
After consolidating one of its allocation areas last year, Jeffersonville now has six TIF districts.
“The two larger ones are the Inner-city Road/Gateway District and the Harbours/Falls Landing District,” said Larry Thomas, communications director for Jeffersonville.
“The other four are relatively small and were project-specific when they were created.”
Jeffersonville’s city hall sits on property purchased with TIF backing.
Quartermaster Station had fallen into disrepair before the city partnered with privately-owned Sun Properties to develop the site, Thomas said. It now holds Jeffersonville City Hall and other businesses.
Several roadway improvements have been funded through Jeffersonville TIF districts, including upgrades to Veterans Parkway and Tenth Street.
The Clark County city also used TIF to fund the Jeffersonville Aquatic Center.
Jeffersonville Mayor Tom Galligan spoke with the city’s Redevelopment Commission last week about using sewer funds for a sewer project.
He’s interested in the concept of taking on a $10 million bond issue to build a downtown canal. The canal, according to Thomas, would help Jeffersonville deal with sewer overflows as mandated through its consent decree with the Environmental Protection Agency.
The bond issue would be repaid with TIF funds under Galligan’s plans.
