Democrat Infrastructure Plan Could Hit Legal Roadblock
Although Indianapolis City-County Council Democrats are touting their “Rebuild Indy” plan as a viable alternative to Mayor Greg Ballard’s infrastructure plan, there could be a legal road block that could stop their proposal from taking effect.
As part of their $340 million plan, Council Democrats have proposed taking $45 million from the downtown TIF district. However, that move could violate an agreement the Democrats reached with the Mayor earlier this year.
The Democrats and Ballard administration were at odds over the use of downtown TIF dollars so they reached an agreement limiting the use of the funds. The policy passed by the Council and the MDC states:
“Reserves and Fund balances for each TIF shall include, and, otherwise, be determined and established consistent with the following considerations: 1) all reserves required by bond covenants, plus 2) an additional reserve equal to no more than 10% of the outstanding principal amount of the bonds, plus 3) any and all additional amounts necessary to improve or, at the very least, maintain current credit ratings.”
In addition, with regard to the coverage ratio, the policy also states that when considering the amount of TIF revenue to pass back to the base assessed value, consideration shall be given to maintain coverage ratios that preserve the credit rating of the TIF bonds. In other words, enough money must be kept in the TIF to allow the city to keep its AAA credit rating.
With the $45 million in cash payments from the TIFs, that would violate the 10% reserve policy the Democrats and Mayor agreed to, and in addition, if the entire $45 million in road funds came from the Downtown Consolidated TIF, that would leave the city with 0% in reserves, could which would drop below optimal coverage ratios and deplete any cash for other economic development projects.
And to make matters more interesting, it’s important to note that TIF funds can only be spent in or around the TIF and cannot be spent on operating costs.
It will be interesting to see how this all plays out.
