A recent study on Tax Increment Financing (TIF) concludes the economic development tool used in nearly every Indiana county provides a positive, “unique impact” on a county’s income, though one economics professor interprets the study differently.
The study, completed by economic professors at the University of Southern Indiana and commissioned by the Indiana Economic Development Association (IEDA), found that a county with TIF related investments of $200 million generates $288 million in income – from 180 total jobs – more than a county without TIF when factors, such as the Great Recession and national and industry-specific trends are factored into the equation.
Thus, the authors conclude TIF gives counties and cities a “unique competitive advantage” compared to non-TIF areas with similar characteristics.
The IEDA said the study confirms TIF as a “beneficial tool” for economic development.
But one other state economics professor has a different opinion on what the study reveals.
Michael Hicks, director of the Center for Business and Economic Research at Ball State University, said the USI study is actually one of, if not, the most critical study of TIF as an economic development tool in recent years.
If all the 180 new jobs and $288 million in added income stream from $200 million of TIF-related investment the study found is true, that equals $1.1 million of investment per job, much lower, according to Hicks, than the national average of three or more jobs per $1 million of investment. Hicks also noted that while TIF in Indiana is only close to three percent of all parcels, it’s nearly nine percent of the gross assessed value of property in the state.
“As an economic development tool it’s totally horrendous,” Hicks said, adding that he believes his center’s research, as well as others, shows TIF mainly benefits consulting, legal and engineering firms at the expense of state taxpayers.
The USI study, along with the 2015 Indiana Legislative Services Agency (LSA) and a handful of other studies, including a few by Ball State, regarding TIFs will likely be looked at and studied by state legislators to see if the state’s rules on the use of TIFs needs to be possibly reevaluated and changed. The 2015 LSA study found the impact if TIFs is also positive but so marginal that it wasn’t a “meaningful” impact.
Tim Eckerle, executive director of the Grant County Economic Growth Council and one of the members of the 12 person steering committee for the USI study that offered peer-review of the study, said TIF, like the study concluded, has had a positive impact, specifically in Grant County.
Eckerle cited Weaver Popcorn in Van Buren, the Wal-Mart Distribution Center in Gas City and Dollar General and Cafe Valley in Marion as some examples of TIF success in the county.
“If you were to hand any study to two people, they’re likely to interpret it two different ways,” Eckerle said, regarding criticism of the study. “Let’s go visit Dollar General or Cafe Valley. Without TIF they would not be here. That’s the bottom line.”
The fate of TIFs in Indiana is unsure at the moment, but if the state were to curtail, limit or get rid of the use of TIFs completely, Eckerle has one big question for legislators.
“My question is what are you going to replace them with?” Eckerle said. “Having a project pay for itself with public funding makes perfect sense.”