Why does Carmel use TIF?

Let’s begin with a simple definition. TIF stands for Tax Incremental Financing, a tool created by the State of Indiana and used all across the country to encourage redevelopment of areas that have been neglected over time.

Here is how TIF works: An economic redevelopment area is designated with specific boundaries and a base tax year is established. Then, for a period of up to 25 years, all increases in business property taxes (not single family home taxes) in excess of the amount received in the base year go into a fund for redevelopment. That redevelopment fund is used to pay for bond issues that facilitate the redevelopment of a project, usually for parking structures, streetscapes and other improvements.

“We have used TIF as a way to breathe new life into areas once known as “Old Town” or areas that had simply never developed to their full potential…”

We have used TIF as a way to breathe new life into areas once known as “Old Town” or areas that had simply never developed to their full potential – like the 80-some acres of land that is now City Center. That’s just one area where TIF has been used to encourage private developers (in partnership with the City) build architecturally significant structures that attract good employees and employers and increase the city’s value.

Redevelopment focuses attention on improving older established areas of the city where it costs less to build. Redevelopment brings vibrancy and pride back to neighborhoods that felt long forgotten. In fact, Carmel would not be the thriving city it is today, able to compete globally for commerce, without our redevelopment efforts done in conjunction with TIF.

And here is the best part. TIF revenues don’t just simply go away. After they are used to redevelop a certain area such as Midtown, City Center and the Arts & Design District, the tax revenues will eventually return to the City as a whole, which will keep our tax rates low for many future generations.

Why focus so much on this?

As you may know, a large portion of taxpayer money is spent building and maintaining streets, water and sewer systems, fire stations and storm water systems as well as providing police patrols and other government services. When developers build new neighborhoods in large, green fields – away from existing structures and services like our High School and Library – it costs taxpayers more than redeveloping areas where city services already exist.

Many cities have virtually abandoned the oldest sections in their communities that are not attracting new residents, businesses or capital. The city and its taxpayers, however, long ago built and paid for roads, bridges, fire stations and water and sewer lines and are continuing to pay to maintain those services in these older areas.

Carmel is aggressively using the tools provided by state law to redevelop our older areas where we already have multimillion dollar roads, police and fire protection and underground utilities in place. The funds used to build the Palladium along with the Studio and Tarkington Theaters and the parking garage came from TIF bonds.

We are also redeveloping the old town Arts & Design District and City Center with higher densities because we understand that for a community to be successful over time, it must provide a variety of housing types and styles. While we already have many great suburban style neighborhoods, previously we did not have many housing options for residents that desired townhomes, condominiums and downtown apartments.

Redeveloping may seem expensive but it is not nearly as expensive as the long term costs of green field development, where the true costs tend to be hidden and not always readily identified up front when a zoning change is made. Many cities across the United States have allowed so much sprawl that it becomes too expensive to maintain and severely limits their ability to provide the funds needed for good schools and basic maintenance of their streets and parks.

The TIF bonds are carefully timed to be paid in full when the TIF districts expire. The taxes that were going toward TIF bond payments then come directly back to the community in the form of city, county, township, library and school tax income.

We also know that for redevelopment to work it has to be a partnership between the city and real estate developers. Neither government nor business can successfully redevelop older areas without each other. Our Carmel redevelopment districts are producing record breaking new revenue which will allow future city leaders to maintain our already low property rates and probably lower them again. This is even before inflation or any future growth of our TIF districts is taken into account.

We should also note that the City has taken a great deal of care to structure these redevelopment deals in such a way that it reduces the risk to the taxpayers.

This has breathed new life and attracted private sector investments into aging and underused areas of the City. In addition to the financial gain, future generations are also left with beautiful amenities, architecturally significant structures, increased property values, commerce, culture and sustainable development in the central core of the city.

TIF is not a burden … but a gift to future generations.


Authored by Laura Campbell, Ron Carter, Sue Finkam, Anthony Green, Bruce Kimball, Kevin Rider and Jeff Worrell