Financial Accountability: Ending TIF Abuse in Charlestown

Moving Charlestown Forward by Keeping Charlestown First begins with providing Financial Accountability.


Excessive and abusive use of Tax Increment Financing (TIF) over the last decade has sabotaged development efforts and increased the tax burden on residential property owners.


The present administration has repeatedly claimed that its use of TIF has not raised taxes. A mayoral candidate who makes such claims based on Charlestown’s current TIF strategy is either deliberately misrepresenting the process or doesn’t understand how TIF works. 

Abuse of TIF produces higher property tax bills. 

Here’s how:

  • Property tax bills are calculated by multiplying the value of a home by the tax rate. 
  • The tax rate is flexible based on a formula driven by the total value of properties within a taxing unit and the amount of money needed to operate a city or other unit.

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If we want to compare Charlestown’s taxing of homes to a sister community that does not abuse TIF we need only look to Sellersburg. The two communities have similar populations and approved budgets for 2018.

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*Keep in mind that a state statute has a property tax cap of 1% for residential property, so the owner will not be required to pay more than 1% of its assessed value. In the Charlestown home example the actual amount owed before any other possible deductions would be $1,500.

As you can see, Sellersburg has a similar budget need, but a much higher property value which gives them a much lower tax rate than Charlestown, because Sellersburg does not abuse TIF. 

When the tax rate is kept low, property owners benefit. 

Abuse of TIF districts raises the tax rate and places the burden for meeting the budgets of our city, county services, library, schools, and fire protection district on residential property owners. 

TIF is not inherently bad. When used in moderation TIF can help provide important infrastructure improvements. CHARLESTOWN’S current use of TIF is dangerous. Typically, TIF does not take away funds from other units. It just freezes their revenue for the duration of the TIF (25 years). HOWEVER, as Mayor Hall has admitted, “When any branch of government owns a piece of property, there are no taxes paid on that property.” Every time the City of Charlestown, through its Redevelopment Commission led by Mayor Hall, buys property, it steals money from other taxing units because it reduces the assessed value to zero in a shell game that involves removing the property from the existing TIF then placing it back in to restart the clock. 

TIF use like this throughout Indiana has cost other taxing units as much as $320 million, with the greatest negative impact on our schools. One recent review of TIF found that statewide, the money diverted from schools because of TIF could have funded the salaries of an additional 2,400 teachers!

You have my promise that if elected I will review our existing TIF districts and ensure that they are being used in ethical ways that do not negatively affect our economic health.

 

This is particularly important for residents who live farther away from the city center and outside of established TIF districts. If you live in communities like Ashley Springs, Danbury Oaks, or Hidden River Valley, then your property taxes are kept artificially high so that Mayor Bob Hall, self appointed president of the Redevelopment Commission, can fund projects in the downtown area. Ask yourself, are you reaping the full benefit of your investment? 

TIF has been used throughout the country since it was first created in California in the 1950s. But that old adage about jumping off bridges after your friends should bear heavily on our decision to use TIF in Charlestown. Following in the footsteps of other cities’ bad decisions and risky investment practices should NOT be in our plan. California significantly restricted TIF and did away with their Redevelopment Authorities in 2011 after abuse of the funding had a disastrous effect on their schools and other public service entities.

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You see, TIF is too liberal, even for California!

 


 Sources:
DeBoer, 2016: https://pcrd.purdue.edu/ruralindianastats/downloads/The-Use-of-Tax-Increment-Finance.pdf?fbclid=IwAR3vWHgQVhVqBmR46x1XmBjq9-AD5GVF4-G1VoHBTo5fGEA1oW9jVOmJs64
Ball State research: https://projects.cberdata.org/reports/TifEconEffects-012815.pdf?fbclid=IwAR3mWhuTULAC0UZ62j1nXDQWoIo3OI_wU08pXYIFnuLf3jlSXWL1OPL6QSU
IBJ: https://www.ibj.com/articles/57112-study-tif-districts-divert-320m-annually-from-local-needs-in-indiana?fbclid=IwAR0oeNPUKUsqIbojDKnJGVRlr0MrAj7aoAk1ibkf-C9wl3_0_RE06IaNN0E
Lefcoe and Senson, 2014: https://www.planningreport.com/2014/07/24/demise-tif-funded-redevelopment-california
2018 Clark County Budget Order: https://www.in.gov/dlgf/files/Clark%20County%202018%20Certified%20Budget%20Order.pdf

 

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