IU expert says Indiana uses TIF differently than most states because of tax caps

But here’s what a TIF district is meant to do, according to Justin Ross, associate professor at Indiana University’s School of Public and Environmental Affairs. The general idea of a TIF district is that a proposed project or development will benefit development around it, and that area should shoulder the bulk of the payment for it. Revenue generated from private development in the district — through increases in taxable assessed value — is used to finance the public improvements. And when the project is paid off, the TIF district goes away.

While most of the world uses TIF districts in that way, Indiana does it a little differently.

“In Indiana, what you see is TIF districts are created, but it’s not quite clear why,” Ross said.

The city of Bloomington is hoping to combine five of the city’s six TIF districts, by expanding the districts to create, as some city council members deemed it, a “super TIF.”

In the city’s case, the idea is that a consolidation will extend the life of several of the districts, which are set to expire in 2025 after a change in state law, and give the city the ability to issue about $48 million bonds for projects with large price tags. It’s seen as a flexibility tool that will possibly allow Bloomington to move ahead with its long-anticipated Switchyard Park project.

In the purest sense, a TIF is done for a reason, the parcels in it are chosen for a reason and there’s a particular project in sight. If there’s extra money in the district, that money should go back to the tax base.

But, in Indiana, it’s not unusual for a TIF to be used in a very different way.

“It’s kind of reflective of the situation that Indiana’s gotten itself into,” Ross said.

That situation is Indiana’s tax caps.