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January 15, 2008

Tax Increment Financing

Redevelopment Commissions across Indiana face the serious possibility that the Indiana General Assembly is about to make a major overhaul to the laws governing tax increment financing ("TIF") districts. The Committee on Tax and Fiscal Policy have passed bills (in particular, Senate Bills 17 and 18), as amended, with the following principal provisions (proposed to be effective July 1, 2008):

  1. Senate Bill 17 appears to be intended to subject bond issues authorized after July 1, 2008, for projects costing over $2,000,000 payable from TIF revenues to the petition remonstrance process, unless the issuer obtains a waiver from the Indiana Economic Development Corporation. Senate Bill 18 appears to be intended to subject bond issues authorized after July 1, 2008, for projects costing over 0.5% of the total taxable property within the political subdivision (but no lower than $200,000 and no higher than $7,000,000) payable from property taxes to a voter referendum process. Even apart from the policies these bills seem intended to effect, we believe that the current language of Senate Bills 17 and 18, taken in conjunction, may lead to inconsistent or unintended results.
  2. For use of TIF revenues for projects outside an allocation area, the current law "in or serving" rule would be replaced with a requirement that such projects be physically connected to the TIF allocation area.
  3. Expanding an existing TIF allocation area would in all cases require all procedures applicable to the initial creation of the TIF allocation area and would also require a finding that the existing area does not generate sufficient revenue to meet the financial obligations of the original project. In addition, any amendment to an existing declaratory resolution or an existing plan would require all procedures applicable to the initial creation of the redevelopment project area or economic development area.
  4. TIF bonds and TIF allocation areas would be limited to a maximum term of 25 years.
  5. Redevelopment district bonds in any principal amount would not be permitted to be issued without legislative body approval. (Under current law, only bonds over $3,000,000 require legislative body approval.)

Redevelopment commissions and local officials with concerns regarding these proposed amendments should consider discussing such concerns with their state legislators.

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