ELKHART — State lawmakers are on the verge of clamping down on the way communities use Tax Increment Financing for economic development projects.
The legislation, Senate Bill 118, would:
■ Dissolve existing TIF districts created before 1995 by 2025. Districts could be re-established, but the formula used to collect new revenues would be reset in a way that would essentially mean the district would have to begin rebuilding its revenues.
■ Grant legislative bodies such as city councils and county councils more authority in how TIF revenues are used. Currently, redevelopment commissions control a majority of the spending decisions in most communities.
■ Prohibit the use of TIF revenues to pay for fiber-optic and broadband expenses.
The bill, authored by Pete Miller, a Republican from central Indiana, is headed to a conference committee to work out final changes in the next few days.
Local officials plan to voice their concerns at noon Friday, March 7, when area lawmakers gather for a Third House meeting at the Elkhart Public Library.
The legislation would likely affect just about every county and city in the state in some way, said Diana Lawson, who helped organize SoMa, a downtown revitalization group that is collaborating closely with the Elkhart Redevelopment Commission on plans to improve the downtown.
TIF revenues are generated in designated districts and capture new property taxes from new development within the district. Some districts are project-specific and then cease to exist. But others, known as legacy districts, continue to exist and generate revenues that can be used within the district for projects deemed to benefit economic development.
Much of the control of TIF districts is held by redevelopment commissions, which are appointed positions.
The amount of power redevelopment commissions wield has caused resentment and concern from some Elkhart city council members who feel the existing law provides too much authority over tax dollars by people who are not elected.
Some of that animosity has surfaced at city council meetings where proposals have been scrutinized by Republicans.
Elkhart City Councilman David Henke, a Republican, has been an outspoken critic of the existing state laws governing TIF districts.
Henke said he’s lobbied state lawmakers this year on concerns about the issue and “enthusiastically” supports the bill.
Each year, Henke said, it has become easier for cities to “grow” TIF zones while at the same time, penalize schools, libraries and townships that are unable to share in the new tax revenues.
“Millions of dollars have been held back from the city's general fund until mayors cry poor, yet house millions of dollars in the TIF accounts,” Henke said.
Advocates of Elkhart’s downtown, though, say some long-range plans could be affected if state law is changed.
The downtown TIF is a legacy district.
“We feel that SB 118 will be significantly detrimental to the redevelopment of our downtown,” Lawson wrote in an email sent to advocates of the downtown whom she urged to attend Friday’s meeting.
Lawson points out TIF dollars have been used to construct RiverWalk, part of the Lerner Theatre and the streetscape project along South Main Street. It has also been used to acquire property that resulted in development of the East Bank and demolition of the Elkhart Foundry and the Armory, both of which are both targets of future development.
The legislation, she wrote, “is so bad that Indianapolis found a way to exempt themselves from the effect it will have on other Indiana communities.”
Crystal Welsh, Elkhart’s director of community development who works with the redevelopment commission, said she’s most worried about the impact the legislation would have on the downtown TIF, which is a funding source for plans proposed by SoMa, some of which were recently adopted by the city.
Long-range plans in the downtown TIF include renovating the civic plaza as well as significant upgrades to Waterfall Drive and North Main Street, she said.
Welsh said projects in the past and future are helping drive private investment in the downtown.
“And if we aren’t able to do that anymore, the incentive for private investment goes away,” Welsh said. “That’s the frightening part.”