Contact: Michael Snyder, MEK Group, 317-805-4870
Lee Lewellen, IEDA CEO, (317) 313-8365
Greg Wathen, IEDA TIF Study Chair/ Economic Development Coalition of Southwest Indiana (812) 423-2020
Dr. Mohammed Khayum, Business Dean, USI (812) 465-1681
IEDA directs “myth-busting study” about Tax Incremental Financing (TIF), University of Southern Indiana plans comprehensive statewide research
New benchmark research expected to provide non-partisan review
INDIANAPOLIS – Multi-million-dollar tax incremental financing: Boon or bane? In economic development practice, professionals and elected officials often possess widely ranging views about tax incremental financing (TIF). Is TIF funding truly a critical and effective tool for accelerated economic development? Or is it an over-rated practice that drains valuable resources from Indiana cities and regions?
“Powerful myths and considerable misinformation about TIF activity in Indiana regularly cloud understanding and perceptions about the value of the TIF tool,” said Lee Lewellen, CEO of the Indiana Economic Development Association (IEDA). “To clear up possible confusion and document best practices, IEDA is funding and directing a comprehensive statewide TIF study that will be fair and non-partisan.”
To secure the non-partisan nature and future validity of the study, IEDA commissioned a national RFP search and subsequently selected the University of Southern Indiana (USI), Center for Applied Research out of a national group of respondents. USI will now research and produce an all-new independent study of Tax Increment Financing (TIF) in Indiana.
Commenting on earlier assessments of Hoosier TIF applications, Greg Wathen, president and CEO of the Economic Development Coalition of Southwest Indiana, noted key differences in the forthcoming USI research: “Though recent studies have looked at how tax increment financing impacts state revenue streams, the IEDA study will review the impact of TIFs on key local revenue streams such as option income taxes where data is readily available at the county level.”
Continuing, Wathen, who also serves as chairperson of the IEDA committee overseeing the IEDA study, added: “The study will also take into consideration the significant changes in property tax revenue attributed to the shifting of local school taxes to the state, along with establishment of property tax caps and the implementation of ‘circuit breakers,’ which were not adequately accounted for in other studies looking at the use of tax increment financing in Indiana.”
“The overall goal and USI focus will be to produce a solid, myth-busting IEDA study that will serve as a valid benchmark and prove useful in the years to come,” said Lewellen.
The Dean of the USI Romain School of Business, Mohammed Khayum, outlined critical background for the forthcoming study: “After three decades of use by cities, towns, and counties in Indiana, tax increment financing has developed a distinctive and complicated place within the state’s economy. This complicated interconnectivity could be described as a dynamic ecosystem.”
Why is this relevant? Khayum, a full professor of economics at USI and director of the IEDA study, further explained: “Stakeholders from a cross-section of economic sectors interact though tax increment financing and their decisions play an important role in transforming existing economic conditions into preferred ones for many geographic areas within Indiana.”
“Many economic development professionals and elected officials fervently believe that TIF transformed their cities and regions into economic powerhouses,” said Lewellen. “Others claim TIF saps needed funding and sinks regions into debt. What’s the truth? Currently available analysis doesn’t fully answer the question.”
The comprehensive study is expected to be completed and released in early 2016. It will examine positive impacts of Hoosier TIF funding and will examine opportunities for improving the tool. Given the widespread use of TIF to accelerate new development and expansion for cities and counties, the study will specifically examine and document strengths and possible weaknesses of the tool. Further, the study will document best practices of TIF implementation and administration.
Lewellen noted that results from the USI research is expected to fill in gaps in previous studies that may not have proven wholly successful. “It’s fair to say that the overall lack of a true benchmark study has unfortunately helped increase confusion about the validity and effectiveness of TIF efforts,” he said.
To alleviate this confusion and help establish best practices, IEDA decided to commission and oversee a major new comprehensive study. Following a national outreach inviting universities and research firms to submit proposals, a 12-person IEDA TIF study steering committee selected the USI Center for Applied Research to conduct the independent research.
“The University of Southern Indiana has been deliberately tasked by IEDA to produce a non-partisan and independent analysis,” said Lewellen. The resulting benchmark report is expected to include recommendations for improving TIF usage and future applications for Indiana cities, towns, and counties.
The study is funded through specific contributions to the IEDA Foundation made by over 3o funders including utility companies, various associations, economic development entities, cities, towns and counties.
The benchmark IEDA report is expected to aid present and future economic development professionals and government officials in best adapting, leveraging, using and improving this public financing and opportunity-creating tool.
The 12-person IEDA steering committee, composed of association executives, economic development professionals, attorneys, finance professionals and elected officials, will provide oversight for the project together with Lewellen. Work on the statewide project has already begun.
ABOUT IEDA – The Indiana Economic Development Association (IEDA) is the statewide association representing local and regional economic development professionals and other economic development stakeholders. The Indiana Economic Development Association defines economic development as the facilitation of investment that leads to the long-term community prosperity. For more information, please visit www.ieda.org.