Don’t leave economic development to pros

Economic development may be the most important public policy issue facing Indiana, its counties and its municipalities. It is a shame that so much of what we think and do about economic development is influenced by local economic developers.

Indiana’s future is simply too important to be left to their judgment and experience. The yearlong hubbub about tax-increment financing is a classic example.

Earlier this year, my center published a technical economic study on the effects of tax-increment financing in Indiana. The results were clear. TIF boosts investment within TIF districts but reduces it outside the district. TIF use increases taxes and reduces countywide employment, albeit modestly. That generated a wild response.

The state’s economic development association developed a bad case of hydrophobia. They wrote letters to Ball State’s president condemning our research. One east central Indiana member asked the legislature to defund Ball State’s economic development work (so much for that Regional Cities collaboration).

Most egregiously, one Indiana Economic Development Assoc-iation member tried to derail a 30-year contract Ball State has had to conduct economic development training.

He received a familiar response — they laughed at him. Still, it makes one wonder why Indiana’s local economic development organization is so terrified of anyone who studies local economic development?

I think the reason is that nationwide, local economic development is in the midst of revolutionary change, and most Indiana local developers are entirely puzzled by the adjustment.

In the past quarter-century, Indiana has spent perhaps $50 billion on business incentives with far too little to show for it, unless, of course, you are a local developer or consultant. That model is being rapidly abandoned for efforts focusing on local quality of place. These changes impact policy and practice across the whole domain of economic development. TIF is just one example.

In the months since the Ball State TIF study, two more have been published. The first is by the Indiana Legislative Services Agency, which had access to confidential employment data at the firm level.

That nationally respected research team conducted the best single study of TIF yet performed in the country. They found what most other studies have; TIF use isn’t creating jobs, but is capturing growth that would have otherwise occurred. So what did the state’s local economic development group say about LSA’s exceptional study? They called it “partisan,” “non-academic” and “not useful.”

Then, earlier this month yet a third study on TIF was published in the Indiana Policy Review. It is too long and detailed to review here, but suffice it to say that county prosecutors and the state attorney general’s office will surely be reading it closely. It details extensive shenanigans with TIF in at least one county.

Today, instead of thinking deeply about the future, our state’s local economic development trade group remains focused on attacking any study of TIF that reveals even a single awkward truth.

But I have to chuckle. As the year comes to a close, Ball State’s much-attacked study was actually the least critical analysis of TIF published this year.

Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to