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June 2, 2014

TIF district changes, loss of funds worry cities

Change to law sets expiration dates for older tax districts

SOUTH BEND, Ind. (AP) — Revenue from special tax districts originally created to help redevelop economically depressed areas will flow away from local governments in coming years under a new Indiana law that sets limits on the districts.

The law approved in March applies to tax increment finance districts created on or before May 31, 1995, or legacy districts.

Under current law, districts created before July 1, 1995, never expire. Those created later have 30- or 25-year expiration dates, depending on when they were formed.

The new law, which takes effect July 1, requires all legacy TIF districts to expire June 30, 2025, unless they are repaying bonds issued before July 1, 2015. Those districts expire June 30, 2040.

“We’re trying to get back to the original purpose of tax increment finance,” said state Sen. Pete Miller, R-Avon, the author of the bill that led to the changes. “The intent is that you are enabling the creation of assessed value that otherwise would not have occurred.”

Lawmakers say that, too often, the districts have become redevelopment slush funds that governments tap for lavish projects such as a 1,600-seat performing arts center in the Indianapolis suburb of Carmel.

“Mayors figured out they could create a cash cow that gave them millions of dollars to spend at their discretion,” South Bend Common Council member Dave Varner told the South Bend Tribune http://TRhd02 .

Mishawaka Mayor Dave Wood said he understood that the districts had been misused in some places, but he is worried about how the loss of funds will affect his city.

He noted that Mishawaka has committed to spending $3.36 million in TIF money each year for the next 20 years to pay for a $160 million sewer project. Without that money, the city might have to increase sewer rates, he said.

Wood said the city could borrow money to pay for the sewer project, thereby extending the life of the TIF, or could appeal to the General Assembly to change the law.

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