Less than a year ago, Hopscotch Coffee took a risk and opened on a newly-developed section of the B-Line Trail in Bloomington.
"We've been the brave pilgrims, if that's the metaphor we want to use," laughs co-owner Jane Kupersmith. "And, we can report that it's going really well."
Being on the B-Line Trail has been a big part of Hopscotch Coffee's success. The coffee shop gets foot traffic from the trail, and as other businesses open nearby, the number of those customers is likely to increase.
"We've been really excited about what's happening here," says Kupersmith. "We've felt really supported."
The B-line is an example of a project, funded partially by TIFs, that is doing exactly what it's supposed to do. When TIFs work correctly, they encourage new businesses such as Hopscotch to open and revitalize communities.
But even though they impact communities like Bloomington in big ways, a lot of people don't know what TIFS are or how they work. Here's a breakdown of what TIFs are and what they do.
So, what are TIFs, anyway?
TIF stands for tax-increment financing. When a TIF district is established, the city takes out a loan that goes toward building up business in a specific area, like Bloomington's B-Line trail. They use that money to increase amenities such as sewage lines, bike lanes and sidewalks in the area to make it more attractive and increase property values.
If you live in Bloomington, you've probably seen TIFs in the news a lot recently. In April, the Redevelopment Commission approved a measure that expanded and consolidated five of Bloomington's six TIF districts, meaning those zones now comprise 1/5 of the city's total area.
And on Wednesday, the Bloomington City Council approved a nearly 50 million-dollar bond --fed by the revenue from that "Super TIF"-- that will go toward redevelopment in the city.
Jeff Underwood is the Bloomington City Controller. In that role, he heads up the city's redevelopment commission, which controls the use of TIF money. He says TIFs jump-start development, which then acts as a spark to jump-start neighborhoods.
"You're hopeful that you'll see continued growth because you're redeveloping an area, that the assessed value will grow," Underwood says. "They'll be other development that happens because of it, and you collect the funds to go inside the TIF."
In other words, if property values go up, so do property taxes and that extra money gets funneled back into redeveloping that area.
But a city can't just designate a TIF district and wait for money to roll in. They need to have a plan to jump-start the process.
For example, when it developed the B-Line, Bloomington made sure it connected to existing business corridors. That made it more attractive for businesses, such as Kupersmith's, to open up shop in formerly undeveloped spaces.
"What you're beginning to see is businesses are buying property and building and redeveloping undeveloped properties along that," Underwood explains. "They're becoming employment centers and living as well so you see different kinds of growth."
But, do TIFs work?
There are critics who say TIF districting, at best, is ineffective, and at worst, destructive, increasing property tax burdens and taking money away from other needed services.
Ball State Economist Michael Hicks co-authored a study that shows many TIF districts don't have a positive impact on communities at all.
"We found, like many others did, that the economic benefits of TIFs aren't materializing," he says.
"We don't see job growth, we don't see assessed value growth in the county that they're used in we don't see employment growth in manufacturing, and we see associated with them higher property tax rates."
He uses Delaware County where Ball State is located as an example.
Several years ago the county designated a renewable energy business park a TIF district. But without a comprehensive plan, the business park has remained largely empty. And, that means it isn't bringing in much tax revenue.
Hicks says the problem is the county is cash-strapped and it's been using the TIF model to avoid spending money out of its general fund to attract businesses to the area.
"TIFs that don't live up to their billing would be TIFs where the dollars are used solely for routine government budget purposes no matter how meritorious they are ," says Hicks.
Hicks says using TIF money for, say, police equipment or trash cleanup defeats their very purpose.
Hicks' study did mention there are factors that indicate certain areas can have success with tax-increment financing, and officials say Bloomington has the right ingredients-- namely, a sizable rainy day fund and a healthy school transportation budget.
Underwood said the city would't undertake the projects if they weren't confident they would do their job:
"If we don't' think it's going to grow and we don't think it's going to redevelop and if there's not a good plan there, there's not going to be any increments," he says."You're doing a lot of work for an area you won't be able to re-invest in."
But, some city council members and Mayor Mark Kruzan agree more oversight is needed. The city plan commission is in the middle of debating a proposal that would put more restrictions on how TIF dollars are spent.
