The last time I wrote about property taxes, which was in August, a “delusion of being finished” about the topic was recognized as that — a delusion. I have been in what I was thinking was the final stages of continuing that story when “residential TIFs” came into the conversation.
A week ago on this page, a letter from Tim Baker was published alerting people to a proposed residential TIF district that he believed was slated to be debated at an Ossian Town Council meeting the following Monday, Oct. 24. Unbeknownst to either he or me, a notice on another page of the same edition announced there would be no Ossian Town Council meeting on Oct. 24. Hence, our readers may be confused, not just about what a residential TIF is but when it will be considered and what are its implications for Wells County property tax payers.
Tim based his assumption that a vote would be taken this past Monday based on an earlier story in the News-Banner that it might be considered as early as the Oct. 24 Ossian Town Council meeting. Obviously, I wasn’t aware of anything different as I processed and placed his letter. There are already two residential TIF projects in the county and the concept has been covered during those processes, but the debate — the pros and cons — have not so much. Additionally, the subject of TIFs and abatements come up often in my discussions and research on property taxes, so Tim’s letter brings up the opportunity to look into these things called TIFs with a bit more depth.
You guessed correctly — it’s complicated.
As Tim explained, TIF stands for a “Tax Increment Financing” District. The tax money that a TIF property originally collected still goes to the taxing authorities in that district. The taxes from any increase in assessed value goes to the TIF district instead of going to the taxing units which serve that property, such as the county’s general fund, the unit’s general fund, schools, library, solid waste and other services. TIFs have been used for years to help attract industries and fund the development of industrial parks which creates jobs and, in theory, attracts further retail and residential development and growth.
Residential TIFs are a relatively new option to help develop housing. Let’s use the proposed 71.75-acre project on Ossian’s northwest side as an example. The properties — technically two lots —are assessed at a total of $103,000, generating $1,308.96 in property taxes this year. If a TIF District is established there and the developer begins selling lots and building homes, the assessed value would obviously increase but the taxing entities would continue to receive the $1,308.96. The property owners — the developer and the new individual lot owners — would receive property tax bills based on the new assessed values multiplied by the current tax rate. The revenue over and above the $1,308.96 would not necessarily go to the developer, Wells County Economic Development Director Chad Kline explains. The Redevelopment Commission has full control of how, when, and where the funds are able to be accessed.
“It would only be used for infrastructure,” he says, which in this case includes an enhanced requirement by the Town of Ossian in order to accommodate their plans for additional housing north of this land.
What a residential TIF does, he explains, is alleviate a significant amount of the risk involved in residential development in rural communities, something developers are increasingly reluctant to pursue in an increasingly competitive market to build homes and attract families.
Part of it is keeping home-lot prices affordable for rural markets, part of it is what rural communities have to do to compete for housing in order to attract families to fill the job positions in those communities.
Tim Baker cites what he calls the unfairness of those families enjoying the government services — police and fire protection, for example, as wells as the schools — without technically paying for them. He compares it to the student loan forgiveness, when one group gets benefits at the cost of others. Chad counters that while no revenue is actually lost to the taxing entities involved — in this case primarily the Town of Ossian and Northern Wells Schools — it “could” impact the tax rate.
“There are a ton of different factors that go into determining the tax rate,” he says. If you’ve been following this property tax saga, you will certainly understand that. It’s complicated.
Part of the TIF process includes studies by independent “experts” on the district’s potential impact. One study started with the district’s current tax rate of $1.1872. If there were no TIF District applied and assessed values follow a predicted path, that rate would become $1.1804. This demonstrates, Kline shares, how small of an impact the project might have with the TIF. Meanwhile, if the development sells 51 lots, studies show the school district would gain about 26 students. Based on the current per-student funding by the state, Northern Wells would gain $162,630 per year. Those families would also add to the income and excise taxes the county receives, part of which pays for public safety.
This would be the best place to add that schools’ general operating funds are not funded by local property taxes (now totally funded at the state level). A TIF supporter might say that these new families would generate more than enough sales and income taxes to make up for any property tax shortfalls to the other entities. However, TIF opponents might then point out that other school funds are totally dependent on property taxes, such as transportation and the debt service funds.
Obviously, it’s a two-edged sword.
Tim Baker watched the residential TIF process play out for a new development on Markle’s east side last year, which is within Northern Wells’ district. It passed by the NWCS board by a 3-2 vote and the county commissioners by a 2-1 vote. He questions the process and wonders about possible conflicts of interest. He has had more than one lengthy chat with State Rep. Matt Lehman; he has told him that he is “feeling a little bit abused” as a taxpayer. Chad understands and appreciates Tim’s passion.
Tim also asks why a new development on Bluffton’s north side did not utilize a residential TIF. Chad defers that question to the Bluffton Redevelopment Commission., but notes that the commission was aware of the option but was never specifically asked to adopt a TIF, including by the developer.
A residential TIF district has been utilized for the Premier Flats apartment complex. One member of the Bluffton Redevelopment Commission explains that it was an option that initially was not looked upon favorably. One of the triggers, however, was that a portion of the TIF revenues would be utilized for “amenities development,” specifically parks and recreation.
Which reinforces a point Kline makes that the TIF revenue can be used “for or to benefit the zone.” For example, it could be used to help purchase a new fire truck or police car that services the district or for a specific school project. The industrial TIF in Bluffton has designated a portion of the TIF revenue to support the vocational education program at Bluffton High School. Again, these decisions are entirely up to the redevelopment commission involved. These options can be part of the original plan or the plan can be amended at any time during its lifespan, which can be up to 20 years.
———
Whichever side of the TIF debate you find yourself on — or if you’re undecided — you will have the opportunity to weigh in.
In a meeting Friday of the Ossian Development Commision, the initial resolution to establish this TIF was passed by a 3-0 vote. The Area Plan Commission will need to consider it; approval will also need to come from the Town of Ossian and the Northern Wells school board. There will be a formal public hearing most likely in December. Final votes will likely be in January. If you have a strong feeling one way or the other, you will need to pay a certain amount of attention.
———
That is a primer. There are more nuances and details and curveballs, more what-ifs and what-abouts. Enough that I have to wonder if I got every detail shared above exactly right. One takeaway for me from this exercise is that the proper usefulness of any TIF, residential or industrial, depends on specific circumstances.
And there are plenty of questions. Do residential TIFs automatically result in higher tax rates — and thus bills — for taxpayers outside the district? If so, exactly how much? Can you quantify the impact of additional residents’ sales, excise and income taxes that also fund local services and schools? Would the ancillary benefits of growth counter any increase to property taxes? Could it be argued that this increase is the cost of growth, noting the old saying, “if you’re not growing, you’re dying”? Is this a new, necessary part of a rural community’s growth and development? Is it fair that one residential developer gets assistance while another does not? Does it boil down to a question of how badly a community wants to grow? — to survive and thrive?
One more: Is that enough questions for a Saturday morning? I can answer that one.
miller@news-banner.com
