I read, with some amusement, the column entitled “These Bathrooms Don’t Stink,” written by City Councilman Jeff Worrell. In the column he was expounding the wonders of a TIF and how it didn’t cost the taxpayers anything to build new bathrooms along the Monon trail.
I’d like those taxpayers to remember there’s no such thing as a free lunch. Somebody, somehow, is paying for it.
The money for these bathrooms did not appear out of thin air. It came from, as Mr. Worrell tells us, a TIF, or tax increment financing project.
TIFs and these revenue streams are much more complicated than Mr. Worrell or I can explain in a few paragraphs, but let’s look at what a TIF is supposed to be: A method to entice developers to invest in and rejuvenate blighted areas. Does anyone really believe Carmel has blighted areas? Old areas maybe, but blighted?
Putting that aside, let’s look at Mr. Worrell’s next-to-last paragraph.
“The developer invests the funds today, and if the assessed values when the buildings are built do not match the projections — meaning fewer taxes flow to repay the bonds than projected — the risk is on the developer. Neither the city nor the taxpayer makes up that shortfall.”
The developer, in this case, is Pedcor. The City of Carmel issues them bonds, which must, eventually, be repaid. What happens if Pedcor goes belly up? Who is responsible for the repayment of the bonds? The City of Carmel.
Some of the risk for the project has been assumed by the city in order to draw in the developer. The city has still funded the project, or at least, a portion of it.
Why doesn’t the developer go to the bank to get funding? Because the city of Carmel can issue bonds at a lower interest rate than a bank would charge on an ordinary loan. How? Because in most cases, the income from the bond is largely tax free.
The city has sold bonds in the name of the City of Carmel and essentially loaned those funds to Pedcor. The increase in assessed value when the project is complete will increase the taxes paid, and the increased tax will be used to pay off the bonds — in theory.
For the life of the TIF, all the taxes Pedcor pays from any increase of assessed value are going to the bond repayment. However, during this period, Pedcor is also getting city services, such as fire and police, but only has to pay tax that goes directly to the city on the original assessed value of the land.
Pedcor has, doubtless, done an extensive analysis to make sure they come out on top. Did the city of Carmel have any financial personnel do an NPV (net present value) analysis of the tax?
At the end of the day, you and I, as tax-paying citizens of the City of Carmel, have subsidized a portion of Pedcor’s project via a TIF. If this truly were a blighted area, it might be a good way to draw in developers. But that’s not the case here.
It seems strange that the City of Carmel can find funding for the wonderful artwork in its roundabouts and on its streets, but it can’t pay for something as basic as a bathroom on the Monon. Was TIF funding used for the artwork, too?
While having bathrooms available to people who use the Monon is a great idea, I have to say that the financing for these bathrooms does, in fact, stink.
Mike Wheeler, Carmel