Backgrounder: A TIF Comes Home to Roost

October 5, 2017

by Craig Ladwig

There were howls of anguish when a proposal was made to change municipal bidding practices in Indiana to limit the influence of campaign donations. One mayor called the plan disrespectful. A development official took umbrage that anyone would use the word “corruption” in connection with his city.

Today, though, David Penticuff of the Marion Chronicle-Tribune reports that a civil suit there alleges that part of the millions in public money provided to a developer for renovation of a boutique hotel was used for polical donations to a former mayor as payments to the mayor’s relatives and for other personal expenses. The complaint, filed by the City of Marion, alleges that at least $679,000 of the $2.5-million Tax Increment Finance (TIF) bond the city issued to the developer was spent on personal expenses and purchases not disclosed in receipts.

The reform that caused that anguish among city officials would have excluded those who contribute more than a set amount to Indiana municipal campaigns from bidding on city projects, including TIF-financed projects such as the one in Marion.

“Our city council and yours have an opportunity to eliminate the opportunity for malfeasance,” argued Jason Arp, the sponsor of the proposal and a Fort Wayne councilman. “This would not restrict people’s constitutionally protected right to political speech but would instead regulate a city’s bidding process.”

He explained that a developer, engineer, attorney or architect could contribute as much as he liked, he just wouldn’t be able to bid on work for his city. Eliminating the practice of paying for access would free contractors from the burden of participating in funding campaigns. Moreover, allowing for a more diversified pool of bidders could lower the cost of doing business for taxpayers.

A study in the current issue of The Indiana Policy Review of four years of campaign filings in a typical Indiana mayoral campaign found that over 50 vendors, contractors or beneficiaries of contracts made approximately $1 million in campaign contributions that subsequently resulted in the awarding of over $125 million in contracts.

The $1 million raised from vendors equals about two-thirds of the $1.5 million the studied mayoral campaign raised in the four years leading up to the 2015 elections. The contributors were civil engineers, architects, insurance companies, auto dealers and attorneys.

The two largest categories were engineering and legal services, totaling over $800,000. Linear regression analysis of campaign contributions and payments in these categories yielded an r-square value (a measure of correlation) of 90 percent for attorneys and 59 percent for civil engineers.

Perhaps, on reflection, it is a bad idea for Indiana cities to follow Chicago’s example and allow their mayors to use city hall as a fundraising apparatus.

Craig Ladwig is editor of the quarterly Indiana Policy Review.


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