Heller: Filling a Tax Piggy Bank
by Tom Heller
Michael Leppert, a columnist and lecturer at Indiana University, recently shed light on the $5 billion in taxes already paid and collected that the state of Indiana has amassed in a budget reserve fund. That is money now bubbling over 12.5 percent of general-fund spending levels and triggering an automatic refund to state taxpayers. Leppert argues that the state should not be in the business of stuffing a piggy bank with our taxes.
I agree, but Leppert apparently is unaware this same thing is happening at local governments, although it is far less visible — and far less reported — than the state’s bulging coffers. It is just as real, however, with many, many tens of millions of tax monies already paid and collected accumulating in various bank accounts with no plans to spend it.
Where I live, one TIF (Tax Increment Financing) district last reported an end-of-year cash balance of $15 million, growing by $3.5 million a year. They apparently can’t spend it fast enough. I have elsewhere projected it will amass $40 million in unearned tax revenue.
Another TIF district is collecting tax revenues at three times the rate of its ongoing annual debt service. Ordinarily, bondholders are satisfied with a 25-percent bond reserve, but at this pace this district will build up another $40 million reserve; it’s already reached $13 million.
And a third TIF district has just been formed. Although the bonds it plans for won’t even draw upon its TIF revenues, that TIF already is poised to lay claim to new tax revenues from virtually all the developable commercial property for the next quarter century. All of this is a way to accumulate money beyond the public’s view.
That’s just in the city.
The county has a TIF that won’t be able to address the increased truck traffic that its development will necessitate. The county already has granted abatements to the trucking firms who’ve committed to build terminal facilities there. And the state has provided them a handsome 25-percent tax credit for their facilities. (Our economic development guy didn’t bother to inform the county commissioners or council of this when he presented their request for abatement.)
With all these special funds collecting taxes and stashing that money into idle bank accounts, we have to wonder who’s in charge — and for whose benefit is this being done? Those are pertinent questions because we’ve seen the consequence: My city’s property-tax rate has risen 36 percent since all this started.
Maybe Michael Leppert and the folks at Indiana University can suggest a remedy.
Thomas Heller, a Columbus resident and an adjunct scholar of the Indiana Policy Review Foundation, writes on Tax Increment Finance and other assorted financery.