NEW ALBANY — Big box retailers are presenting a challenge to it, state legislators are considering changing it, and some city officials believe municipalities like New Albany can’t live without it.
Tax-increment financing, or TIF, is an often utilized funding source for sizable New Albany projects. The New Albany City Council and Redevelopment Commission agreed to foot a $19.6 million bond, which will be paid back through annual TIF payments of $1.685 million, to build Silver Street Park and the soon to be completed outdoor aquatic center.
Such a large-scale use of TIF revenue has drawn criticism from state leaders like Rep. Ed Clere, R-New Albany, and local office holders who believe too much of the city’s future funding is tied up in the parks projects.
Last week, Councilman Kevin Zurschmiede — a Republican who is also running for mayor — criticized Mayor Jeff Gahan’s administration for its TIF spending during a candidate forum.
“It actually scares me where we’re at today,” said Zurschmiede, as he added the parks projects haven’t led to more private investment in the city.
Democrat David White, who is running against Gahan in the May primary, has also been critical of how TIF money is being used.
He said TIF districts should be allowed to elapse once their designated time has expired so that the increment in property taxes collected can return to the city’s general fund.
State leaders have considered laws that would limit the use of TIF and place additional restrictions on the funding. Cities like New Albany have hired firms to lobby in Indianapolis against the legislation.
Obviously Gahan’s administration doesn’t agree with the claims that the city has stretched its TIF dollars too far.
“We do an excellent job of being good stewards of TIF money,” said David Duggins, director of economic development and redevelopment for the city.
New Albany has been able to complete substantial projects through TIF, and has actually kept down its debt by utilizing the funding source for some improvements, he added.
WHAT IS TIF?
A municipality typically establishes a TIF district in an area where significant investment is expected to occur, or has begun to shape. For example, the redevelopment commission voted to include the former Coyle auto site in a TIF district recently, as a 157-unit apartment complex is expected to be built on the property.
The government will then foot upgrades such as new sewer lines, roadway improvements or sidewalk repairs in the TIF district. Those improvements are either footed by a bond to be paid back with TIF, or by accrued TIF funding collected within the district over a period of time.
The improvements benefit the area, but they also serve as a lure to attract businesses to a community.
In theory, the combination of the infrastructure improvements and new developments will lead to increased property tax values. The tax amounts that were collected by various government entities such as school systems when the district was declared stay the same, but the city keeps the rise in property taxes, or the increment.
Without TIF, the number of projects New Albany could complete a year would drop significantly, Councilman Dan Coffey said.
Typically a supporter of Gahan, Coffey alleged that many of those who oppose how New Albany has utilized TIF funds are politically motivated, as the city is preparing for elections beginning with the May primary.
Even if the state decides to change TIF laws, Coffey believes New Albany will be in good shape.
“Of the 16 years I’ve been on the council, I’ve never seen the city in as good of financial health as it is now,” he said.
He referenced the millions of dollars New Albany has chopped off its sewer debt in recent years — a process that was aided by TIF contributions from the redevelopment commission.
POTENTIAL CHALLENGES
Even if the state doesn’t pass legislation changing TIF regulations, cities like New Albany face other issues.
The city is awaiting an Indiana Board of Tax Review hearing to determine whether The Home Depot’s assessment is too high. If the state rules on the side of The Home Depot, it could cost New Albany TIF funding, and could open the gate for more appeals by businesses.
Meijer has also sought a lowered tax assessment from the state for its New Albany location.
Duggins emphasized to the redevelopment commission last week that the upcoming hearing is very important to the city.
WHERE NEW ALBANY STANDS
At the end of 2014, New Albany had about $18.1 million in cash on hand in its seven TIF districts. The proposed projects for each district easily surpasses the pot of existing TIF, but many of those improvements are more or less in their infancy stage without any contractual commitment from the city.
There are several projects on the horizon this year that could be footed through TIF funding including a $600,000 match for the next phase of the Ohio River Greenway, $2 million toward downtown traffic calming measures and $1.9 million for improvements to Slate Run Road.
The city also anticipates receiving about $5.1 million in TIF funding this year.
“Our TIFs are all financially healthy, and they’re all fundamentally sound,” Coffey said.