By: KEVIN GREEN – The Courier-Times| Posted: Tuesday, July 5, 2016 6:00 am
A recently-completed study indicates that tax increment financing (TIF) is a beneficial tool for Indiana economic development and sets the stage for further exploration of TIF use in the Hoosier state.
Tax Increment Financing (TIF) is a tool that captures new assessed value and property taxes from new development in a designated area. Generally, the TIF approach is used only for commercial and industrial property.
According to New Castle-Henry County Economic Development Corporation President and CEO Corey Murphy, the approval process for the creation of a TIF district involves several steps, public hearings and approvals by the elected fiscal bodies involved.
“The primary purpose of TIF is to finance incentives or infrastructure needed to induce private investment,” Murphy said. “I believe TIF is an excellent tool to help create job opportunities and improve quality of place.”
The study, conducted by a team of senior economists from the University of Southern Indiana (USI) and commissioned by the Indiana Economic Development Association (IEDA), independently confirmed that TIF positively impacts the Indiana economy and provides a developmental boost over areas that don’t use TIF.
The study findings didn’t surprise Murphy. He used TS Tech, which chose Henry County in 2007, as an example.
“City and county leaders at the time utilized TIF from TS Tech’s $30 million investment to finance the construction of Brooks Drive, water and sewer improvements and intersection improvements to County Road 400 S. and Ind. 3. Without TIF, it would have been very difficult to make the infrastructure improvements needed to attract the company,” Murphy said.
TS Tech employs over 400 people.
Murphy went on to say that the infrastructure improvements also provide benefit to the industrial park for additional investment.
“An example is the location of Midwest Logistics, with an investment of over $1 million and employment for 30 people,” he said. “TIF played a critical role in the attraction of Boar’s Head which represents a $90 million investment and 290 jobs by the end of 2017.”
In 2011, TIF was used to purchase and raze the dilapidated L&K Hotel and former Denny’s restaurant on the northwest corner of the I-70/Ind. 3 interchange. Now, Victory Range and Armory has broken ground there.
The Henry County RDC also partnered with the Town of Spiceland and City of New Castle to make the water connection between the two communities. TIF funding helped make those efforts possible.
Murphy said the City of New Castle also has rightly used TIF to help encourage the revitalization and stabilization of downtown New Castle.
The study provided five general conclusions:
TIF activity has a positive impact on employment and wages. When statistical methods appropriately control for the effects of the Great Recession, the results demonstrate a positive effect from TIF applications on local employment. Three different approaches were used for the USI study and all demonstrated positive employment and wage growth in TIF districts.
The USI study affirmed findings of the 2015 Legislative Services Agency (LSA) study that also demonstrated positive employment trends in TIF areas. Based on gross assessed value, the LSA study demonstrated that parcels in TIF areas outperform parcels in non-TIF areas with similar characteristics.
Indiana TIF applications serve as a positive tool for place-based economic development (quality of place enhancements). They also generate positive “spillover benefits” to neighboring counties.
As opposed to some existing perceptions, data reviewed for the study show that TIF districts comprise a minimal portion of taxable property within Indiana. TIF districts in Indiana only make up about 3 percent of all parcels.
TIF districts are created as a method for investing in community assets that are intended to attract new investment or new residents and to do so without raising property tax rates.
The IEDA study, which was formally presented at the IEDA summer conference in Muncie June 21, found that TIF districts are critical to many communities’ economic development plans.
This analysis included a broader range of Indiana TIF data than has been previously available.
The study also found that TIF provides considerable benefits for place-based economic development (quality of place enhancements), according to Greg Wathen, chair of the IEDA steering committee that oversaw the research, and president and CEO of the Economic Development Coalition of Southwest Indiana.
The full study is available for download at: http://ieda.org/wp/2016/06/27/analysis-of-tax-increment-financing-in-indiana.