Skip to main content

The Journal Gazette

Wednesday, March 16, 2016 3:36 pm

Ball State study grades TIFs as ineffective as economic development tools

By Greater Fort Wayne Business Weekly

An analysis of tax increment financing districts in Indiana counties by Ball State’s Center for Business and Economic Research concluded that they are an ineffective development tool for Hoosier communities.

In fact, the CBER study found TIFs are associated with less employment, less taxable income and slightly higher tax rates and noted the process needs more stringent oversight, Ball State said in an announcement Monday.

TIF districts were created by the Indiana General Assembly in the 1980s and are run by redevelopment commissions. They were designed to allow local governments to redevelop distressed areas by making infrastructure improvements, such as new roads and sewers. TIFs provide incentives to attract businesses or help existing companies expand without tapping general funds or raising taxes.

CBER examined TIF districts in Indiana from 2003-2012, evaluating their impact on capital growth, employment and tax rates in counties.

"Overall, TIFs are not an effective economic development tool," said CBER director Michael Hicks, who co-authored the study with Dagney Faulk, CBER’s research director, and Pam Quirin, a CBER graduate assistant. "In fact, we found that in the average county, creation of a TIF district led to fewer jobs in manufacturing and retailing as well as a slight drop in the number of businesses.

"This may happen because when businesses start up operations or move into the TIF districts, it shifts the number of jobs while others in the region suffer the job killing effects of higher tax rates," Hicks said. "TIF districts also have no discernible statistical impact on sales taxes in counties. This may be because retail activity simply shifts from non-TIF districts to TIF areas."

Local governments appear to be shifting the tax burden from TIF to non-TIF taxpayers to maintain constant levels of public service, Faulk said.

"While we cannot conclusively report that TIFs are the cause of higher tax rates on existing taxpayers, that is a very likely effect," she said.

Other than increasing the assessed value of property within the districts, TIFs have little impact on economic development, Hicks said.

The report found the state’s aggregate net assessed value in TIFs increased from about $10 billion in 2003 to about $19 billion in 2012.

Researchers also discovered counties are accumulating debt to manage such projects. Indiana’s TIF districts had about 20 percent of the state’s $12 billion outstanding debt in 2013.