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Luring business while losing tax revenue

September 13, 2010

Whitley County's tax increment financing district is the largest in the state.

Tax increment financing districts
offer no new taxes for schools, others

     Offering incentives for attracting businesses to an area is nothing new, and one way of attracting a prospective employer is through a tax increment financing district, which takes any taxes paid on improvements for a property and diverts them back to that same property.
     Schools, libraries, townships and other entities that rely on tax revenue still get the base value of taxes paid on the property before any development took place, but not the new money generated from improvements to the property.
     “We get the original taxes … we don’t get the improvement taxes,” Deb Hiss, Whitley County Consolidated Schools Board of School Trustees Member said of the lost revenue on new taxes paid in the county’s TIF district, which at 3,725 acres, is the largest in the state.
     With Columbia City poised to create a TIF district of its own Tuesday, the school could be looking at even less revenue on any developments within that area.
     “Schools continually lose revenue … everyone loses revenue,” said Jill Western, WCCS board member.
      Tony Zickgraf, business and operations manager for WCCS, said the district tried to figure out a couple of years ago how much new tax money it has not gained from developments in the TIF district but was unable to find a solid number.
     The new taxes collected by the TIF district are diverted to the county’s redevelopment fund, which is handled by the Whitley County Redevelopment Commission.
     Currently, WCCS has a non-voting member, Brooks Langeloh, on the commission.
     “At least we have a voice there,” Zickgraf said.
     Despite that, the school has not been able to get any revenue from taxes collected above the base rate in the TIF district.
     Bill Overdeer, president of the redevelopment commission, said the law is fairly specific and says new taxes generated from a TIF district have to be spent on improvements within the TIF district.
     Infrastructure improvements are the most common uses of the revenue. The redevelopment commission agreed this year to pay for resurfacing work to county Road 600 East along the newest addition to the county’s TIF district.
     Townships, libraries and others that rely on tax revenue are also affected, but Union Township’s trustee was able to reach an agreement with the redevelopment commission to offer some TIF money to the township’s fire department.
     Darl Leininger, Union Township Trustee, said he will receive about $120,000 a year in TIF money for the fire department’s operating and cumulative funds.
     “You have to watch what you’re taking away,” he said of the revenue he wouldn’t have without that agreement.
     Overdeer said the county’s financial adviser is investigating whether the county can make an agreement with the school district to help offset the losses in new taxes generated in the TIF district.
     One common argument for creating a TIF district is that without it businesses wouldn’t locate in an area, and such incentives bring companies with jobs and more families to the area, many of which would enroll children in local school districts.
     Zickgraf said the school’s enrollment data has not shown any such trend of increased enrollment since the creation of the TIF district and development within it.
     Should that occur, though, it would be a double-edged sword because there would be more students, yet no new funding from the TIF to help support those students in school, he said.
     Some businesses in the county’s TIF district donate to the school for certain programs, but not to the extent of new taxes lost to the TIF district.
     Hiss said she understands the need for job creation and growth but wishes it could come without a cost to local entities that rely on that revenue.
     “You don’t want the businesses to go, but how big do we let the TIF district get?” she said, a sentiment more strongly echoed by Western.
     “I’m tired of us bribing people to come here,” Western said.

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