Jonathan Streetman and Candy Neal, Herald Staff Writers

HUNTINGBURG — A recent Ball State University study claims tax-increment financing districts such as the one recently approved in Jasper and the one in place for years in Huntingburg are an inefficient economic development tool.

Huntingburg Mayor Denny Spinner, backed by the numbers, says that’s simply not the case for everyone.

Jasper Mayor Terry Seitz concurs.

“Some Economic Effects of Tax Increment Financing in Indiana,” an analysis of TIF districts in Indiana counties by Ball State’s Center for Business and Economic Research, found that TIFs are associated with less employment, less taxable income and slightly higher tax rates, according to a recent article published by Inside Indiana Business.

“Overall, TIFs are not an effective economic development tool,” said CBER director Michael Hicks, who co-authored the study with Dagney Faulk, CBER’s research director, and Pam Quirin, a CBER graduate assistant. “In fact, we found that in the average county, creation of a TIF district led to fewer jobs in manufacturing and retailing as well as a slight drop in the number of businesses.”

By contrast, Spinner says the numbers prove TIF districts have had an overwhelmingly positive effect in his city.

While TIF districts have not lured a flood of new business to Huntingburg, the TIF has allowed existing businesses to expand and, in some cases, a newly established district has kept crucial business within the county.

“I think there’s some merit to (the Ball State study) ... I keep going to the bottom line. Hicks says it’s effective in fiscally responsible communities. I think that applies to how Huntingburg has always looked at this,” Spinner said. “Historically, over the course of how TIF has been implemented in Huntingburg, we’ve been a pretty fiscally conservative and responsible how we’ve implemented these funds.”

Seitz said Jasper falls under the same category.

“The study recommends TIFs being created in areas with strong financial management practices,” he said, “and the City of Jasper certainly meets those standards including having a rainy day fund.”
Hicks mentioned in the report that TIFs should have more state oversight.

“State legislators have introduced bills about TIF and redevelopment for one reason or another at the Indiana General Assembly every session since I’ve been mayor,” said Seitz, who took office in 2012. “So the report from Ball State calling for ongoing review seems to align exactly with what the legislature is already doing.”

Jasper just enacted its first TIF district this year, after hearing concerns from the public and other local officials about capturing into a TIF part of tax revenue other taxing units would receive. Officials have said the funding would help pay for improvements within the district and in areas that affect the district, which would benefit the community as a whole.

“During our process I have remarked that the timing of establishing our TIF will occur under all new state laws and guidelines, which will enable us to implement them from the beginning,” Seitz said.

Spinner, when defending the use of TIF districts in Huntingburg, always points to Farbest Foods, OFS Brands and Touch of Class and the expansions those Huntingburg-based companies have made.

Through funding directly from a creation of a TIF district in 2006, Farbest was able to add a second shift, which added 350 jobs. The additional capacity at Farbest affected 60 farms at a $36 million impact and increased feed sales to turkey farms at an additional $30 million annually, Spinner notes.

OFS Brands has taken advantage of a TIF district created in 1990, just years after TIF districts were created by the Indiana General Assembly. By being one of the first non-metropolitan areas to employ TIFs, Huntingburg allowed OFS the opening to expand and construct seven manufacturing plants, adding 505 jobs to the local workforce.

OFS again took advantage of a district created in 2004, investing $825,000 in facility upgrades and, instead of relocating to a larger city, decided to maintain company headquarters in Huntingburg.

Touch of Class sits within a district created in 1996 that has allowed the company to invest $500,000 in improvements and renovations — and help keep the company in town. That decision retained 150 local jobs.

“There are always those who tend to try to find the extreme end, and that’s what causes concern of the Legislature, those who are always trying to push the envelope. They have to bring those back to the center,” Spinner said. “I think Huntingburg has historically known the intent of the law and been fiscally responsible.”

While TIF districts have been largely successful in the past, Spinner says the best is yet to come with many of the city’s Stellar Communities initiatives just beginning. He credits the city’s ability to leverage funds through TIF districts as “sealing the deal,” at least from a financing standpoint, in the Stellar victory in August.

“In Stellar, when you get that list of five or six communities that have been short-listed, a lot of them will begin dropping out as they dig in a little bit and see what the actual community participation will be,” Huntingburg Planning Director Paul Lake said.

Spinner said current TIF districts are anticipated to generate $6 million toward Stellar projects over the next 20 years. He also stressed the $6 million will not tap the well dry; instead, even more funds will be able for other projects as they come forward.

There are others who side with leadership in the county’s two cities.

Greg Wathen, president of and CEO of the Economic Development Coalition of Southwest Indiana, said in a recent blog entry that the Ball State policy brief is flawed.

“Quite simply, communities use TIF because it works,” Wathen wrote in his blog. “TIF financing is one of the few and most important local economic development tools available; and, its use helps our communities compete to attract new investment and jobs. Whether it was Toyota choosing Princeton or Berry Plastics expanding in Evansville, none of it would have been possible without the ability of communities to use TIF funds to support these important projects.”

The Indiana Association of Cities and Towns, of which Huntingburg and Jasper are members, plans to meet with Hicks to discuss the study.

Inside Indiana Business contributed to this story.