BEDFORD — Diving into economic development in Bedford — and in many other Indiana cities — is a bit like swimming in alphabet soup. Acronyms like TIF and RDC rise and fall like noodles in broth.
Each acronym deals with tax money. And the taxing policies behind those acronyms have generated millions of dollars for projects in Bedford. Street work (like the construction of Becky Skillman Way and the planned Plaza Drive South), safety improvements (such as the street lights to be installed along John Williams Boulevard) and future development efforts (such as some of Bedford’s Stellar Communities projects) have been — and will be — paid for with that money.
If not for that money, city residents might be paying higher taxes and utility bills, or work might not get done at all, said Bedford Mayor Shawna Girgis.
“(Property tax caps) have really impacted cities like ours, which aren’t growing so fast,” Girgis said. “So (TIF revenues) have been critical.”
It begins with a city declaring an area to be a Tax Increment Financing district.
Bedford had three TIF districts. The first one, basically the area surrounding the Wal-Mart on John Williams Boulevard, was established several years ago, when Joe Klumpp was mayor. Later, the city established two more: one to include the General Motors plant and the area around it, and another to take in the retail developments on the west side of the city.
Since then, the three have been combined into one TIF district, a tactic that has been considered by other Hoosier cities. Earlier this month, for example, the Bloomington City Council voted to combine five of its six TIF districts.
Establishing a TIF district draws something of a line in property taxes for businesses and homes in the area. The area’s assessed value before the TIF establishes a base. Tax money raised by that base goes to all of the taxing units — the county, city, public schools and so on — as usual. But as the assessed value of the area rises, the increase in taxes after the TIF was established goes to the city’s redevelopment commission.
Pat Robbins, president of the Bedford Redevelopment Commission, said the group can use that money for public improvements — things like lighting, sidewalks, sewers, streets and so forth — that are in the district or that will help the district. So, for example, the RDC could pay to put new sewers in part of the district. It also could pay to repair, refurbish or replace a sewer lift station that serves the district.
The Bedford RDC has about $3 million in its coffers, Robbins said.
The RDC also has a long list of commitments. Just last week it allocated $505,454 to cover some of the city’s costs for building Plaza Drive South, a project that could break ground early this summer. It also has agreed to put a total of about $2.6 million toward various parts of the city’s Stellar Community projects.
Girgis said RDCs in some communities have separate staff members and offices. In Bedford, the RDC has neither. Its members — most of whom are city council members — are unpaid.
Girgis said it’s important to have elected officials on the RDC so its members can be accountable to taxpayers in the voting booth.
The RDC also must submit its financial paperwork to the Indiana Department of Local Government Finance, Robbins said.
Robbins also has asked consultants to chart the RDC’s income and expenses for the next several years so the group can meet its current commitments and begin looking toward future needs.
“We need to pull some estimates together to see what our revenue’s going to be. ... We’ve got expenses coming. Those will be fulfilled. ... What projects do we want to be looking for down the line?” he said.
TIF districts and RDC projects have their critics.
In February, Ball State’s Center for Business and Economic Research released a study concluding that TIFs are ineffective development tools. The study looked at TIF districts in Indiana from 2003 to 2012 and evaluated their impact on capital growth, employment and tax rates in counties.
Other than increasing the assessed value of property within the districts, TIFs have little impact on economic development, said Michael Hicks, the center’s director.
The study noted that TIF district use “should be limited to communities with effective local fiscal policies.”
Earlier this month, Justin Ross, associate professor at Indiana University’s School of Public and Environmental Affairs, told The Herald-Times of Bloomington that cities are using TIF districts more like a budget tool in an era of property tax caps set by the state.
Girgis and Robbins say TIF money has been critical in Bedford. And Girgis acknowledged the money provides flexibility cities have lost to the tax caps.
For example, she noted that the city has laid out some $29 million in sewer and stormwater improvements it must complete during the next couple of decades. Aging sewers often overflow during rainstorms, sending sewage into the White River. The city, working with the Indiana Department of Environmental Management, has a plan to fix the problem and avoid fines.
“It is the most expensive thing we’re working on. It is probably the most important thing we’re working on,” she said, noting that it will affect everything from public health to economic growth. “And it’s unseen.”
The city has a plan to tackle that project a piece at a time over the next several years. So far, that plan has not meant higher utility rates for Bedford residents. But down the road, it might.
One idea is to use RDC money to pay for some of that work, blunting the impact on utility bills.
“You can’t have development if you don’t have adequate infrastructure,” Girgis said.
“We’re doing fundamental kinds of things.”
Property tax abatements — an economic development tool offered to businesses inside and outside TIF districts — can add more letters to the alphabet soup.
Generally, companies seek abatements as tax breaks on new investments. The investment can be for new businesses and for existing businesses that are expanding in size or equipment.
Cities and counties grant abatements, pointing to the number of new jobs companies bring to the area. In looking over an abatement request, Bedford and Lawrence County officials use the same scoresheet, which notes the size of the investment, the number of jobs to be created and other figures.
A typical setup provides for taxes to be phased in over a 10-year period. By way of example, a company’s investment might mean a $100,000 increase in its tax bill. If the company is granted a 10-year, phased-in abatement, it would pay no additional taxes the first year, $10,000 the second, $20,000 the third and so on until it is paying its complete tax obligation.
In Bedford, the RDC hears requests for tax abatements. It can recommend approval and send the request to the city council, which has the final say.
That doesn’t mean the company pays nothing.
The business is assessed a 15 percent fee on the property tax savings. The RDC determines where that money goes, choosing from four economic development groups — the RDC itself, the Lawrence County Economic Growth Council, Bedford Revitalization Inc. and the Bedford Urban Enterprise Association (or the LCEGC, BRI and BUEA, for those fond of acronyms).
The growth council is a private organization made of up dozens of business members, including General Motors, the Times-Mail, both local hospitals and many others. BRI and BUEA were created by the city and are run by volunteer boards.
The groups are to use the fees for their continuing economic development efforts.
In the most recent tax abatement, for example, the RDC decided to split the fee equally between itself and the growth council.