KENDALLVILLE — In the 1980s, state lawmakers enacted legislation allowing the formation of tax increment financing districts. A measure approved last year will result in some of those districts coming to an end.
Kendallville Redevelopment Commission members learned at Wednesday morning’s meeting that the downtown TIF district eventually will be dissolved.
“Losing the downtown TIF will hurt the community,” said RDC President Ray Scott.
The Indiana General Assembly created TIFs to allow local governments to redevelop downtrodden areas by improving infrastructure, and providing incentives to attract new businesses and help existing businesses expand without tapping general funds or raising taxes.
The downtown TIF was created in the early 1990s by the Kendallville City Council to encourage redevelopment by supporting infrastructure improvements, and improvements made by business and property owners to their buildings.
The RDC captures tax revenue on improvements made to property within the district, and redirects it in the form of grants or bonds to support improvement projects in the district. The previously established base assessed value of property within the district and the tax revenue that generates are not affected.
Districts created prior to July 1, 1995, are considered “legacy” TIFs by the state. The General Assembly enacted legislation in 2014 that terminates legacy TIFs on June 30, 2025. The date allows for the maturity of obligations issued by July 1, 2015.
The RDC can no longer bond for projects because there is not enough time before July 1, according to Kendallville Clerk-Treasurer Sheryl Hanes. The RDC has no outstanding financial obligations.
“The state enacted this legislation because some communities were not using the funds as they were intended,” she told commissioners.
“We’re being punished because some were not using it the right way,” responded Barb Babcock, an East Noble School Board member and a nonvoting member of the commission.
A study published in January by Ball State University’s Center for Business and Economic Research examined TIF districts from 2003-2012 by evaluating their impact on growth, employment and tax rates in counties. The researchers found TIFs were associated with less employment, less taxable income and slightly higher tax rates.
TIFs capture additional tax revenue that would have gone to municipal government, schools and libraries.
Since the downtown TIF was created, the Redevelopment Commission has used TIF revenue for: improvements to the Main Street railway crossing; downtown infrastructure, including street lights, trees and Wi-Fi; and matching grants for improvements to businesses and buildings through its facade grant program. The RDC sets aside $60,000 annually for facade matching grants.
Kendallville has the option to create a new downtown TIF district after the current TIF expires in 10 years, according to Hanes.