Tax-increment financing, a widely misunderstood economic-development tool in Indiana, operates something like a bank.
The districts make investments in local public improvements such as roads hoping to attract investment from private companies. Often these improvements are financed by borrowing — that is, issuing bonds to be paid off by the growth in the district’s property values and the taxes collected therefrom.
Local governments in Indiana, most specifically redevelopment commissions, have been aggressive in using such districts for debt-financed development. In the five years ending in 2010, Indiana’s tax increment financing districts sold $430 million in TIF bonds, placing the state seventh highest in the nation, ahead of Illinois, Ohio and Michigan. Indiana’s tax increment financing districts expect to collect $580 million this year.
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