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OPINION: "Tax Increment Financing": The Reason Your Assessed Value Skyrocketed
- Logan Foster
- 2 days ago
- 5 min read
"Tax Increment Financing": The Reason Your Assessed Value Skyrocketed By Logan Foster
Date: 05/01/25
No matter where you live in Indiana, you have probably been part of a conversation about property taxes, assessed values, and where your hard-earned dollars go. Perhaps your property tax bill has increased, and you have wondered, "Why? Who is responsible for this?" One answer could lurk in your government's economic development strategy, called Tax Increment Financing (TIF). TIF could be a significant reason why property values and assessments in your city and county are rising. And if that is the case, the Mayor and Redevelopment Commission may be responsible for the increase in assessed values (members of the Redevelopment Commission are appointed by the Mayor and Common Council.) Let's take a look.
What is Tax Increment Financing?
Tax Increment Financing is a tool local governments use to fund infrastructure improvements and promote economic development in specific areas called TIF districts. When a TIF district is established, the taxes collected from the existing property values ("base assessed value") continue to go to schools, counties, and other overlapping government units. However, any increase in assessed property value (the "increment") resulting from new development is diverted to repay infrastructure-related debts or reinvest in the TIF district.
This mechanism is designed to channel money directly into the district to fund projects like roads, water systems, or commercial developments that theoretically would not have happened but for the investment. Once the debt is repaid, the TIF district expires, and the increased property value enters the general tax base.
While TIF districts do not directly raise tax rates, they do have the effect of driving higher property values, which are naturally followed by increased assessments. Moreover, higher assessments inevitably lead to bigger tax bills for homeowners.
Since their implementation, seven of South Bend's TIF Districts have succeeded in bringing development to their respective districts and have also increased assessed values in their districts by a whopping $1.2 Billion. In turn, this has taken an additional $62.5 million from South Bend taxpayers ($24.6 million collected in 2023 alone.)
What Role Does TIF Play in Higher Assessments?
TIF does not increase the "tax rate"—but instead, and by design, TIF drives assessments higher by fostering new development within the district. For example, suppose a previously underutilized area sees the addition of new office buildings or businesses due to TIF-funded infrastructure upgrades. In that case, these improvements are reflected in higher assessed values for properties within the TIF district and potentially for the surrounding area.
Furthermore, critics of TIF argue that these developments often come at the taxpayers' expense even outside the TIF district. According to a 2016 paper from Purdue University's Department of Agricultural Economics, inappropriate use of TIF leads to inequities in distributing tax revenue. For example, overlapping jurisdictions like schools, counties, and libraries may see reduced revenue because the incremental taxes collected within TIF districts are diverted elsewhere. This forces the burden onto taxpayers outside the district to make up for the shortfall, effectively subsidizing the development, and we may see referendums, millages, or other tax-based initiatives to help fund those needed services.
Kenneth Nordtvedt (former Montana State House of Representative) similarly highlights this issue in a paper he wrote titled: The Dark Side of TIF Financing: "So the statement “TIF does not increase property taxes” is clearly incorrect!"... "$30 million a year cannot be diverted out of normal property tax pipelines and into TIF districts each year without raising somebodies’ taxes!"
Also, it is worth noting that at one point in 2024, the Civil City of South Bend owned approximately 600 parcels. While owned by the Civil City of South Bend, those parcels did not pay taxes nor did the City collect tax revenue. In addition to the lack of funding received by those parcels, on many occasions, the Civil City of South Bend purchased new parcels and properties at premium prices ranging from $275,000-$1 M to turn around and give them away for $1.00 to developers (which will then increase assessed values in the neighborhood, so taxpayers pay for the property upfront, give the developer a free property with a tax abatement attached. The City will then use the increased TIF revenue it captures to fund future developments. Lather-Rinse-Repeat. Higher Property tax assessments by design.)
South Bend vs. Mishawaka/Fort Wayne/Elkhart: Property Tax Rates In Other Indiana Cities
Consider the property tax rates in four neighboring Indiana cities. According to data provided by Indiana Gateway, South Bend's property tax rate is strikingly high at 2.1838%, compared to 0.7124% in Fort Wayne, 1.1313% in Elkhart, and 1.4681% in Mishawaka. To put it another way, a homeowner in South Bend pays three times the property tax rate as a homeowner in Fort Wayne.
Looking at the chart above, what stands out to you? Does South Bend employ too many people? Should the municipal government hire 1,841 employees (approximately 1.7% of the city's population? Fort Wayne employs approximately 1% of their population) at a cost of approximately $91 million? Is South Bend's $153 million debt too high? Did taking on this debt fund projects that artificially inflated assessed property values?
A Path Forward For Frustrated Taxpayers
Though it might feel like you are powerless to influence your property tax rates or assessed values, you can take steps to play a more active role in shaping how your community uses tax dollars.
Be Aware of Spending
Compare your city's expenditures to those of neighboring cities. Are public funds being used efficiently? For example, does the local government justify its higher tax rates through meaningful public services, or are there areas where spending could be trimmed? Does your City Council make budget cuts before its passage or rubber stamp the Mayor's budget?
Hold Decision Makers Accountable
Local officials set property tax rates. If you are unhappy with your city's tax rate or municipal spending, engage with your city council or mayor's office. Attend public meetings and demand clear explanations for why certain financial decisions are being made. Your assessor only assesses the value in front of him/her. Did your Mayor/Common Council sell you on the idea of building a new community center instead of rehabbing the existing structure? (Example: the new Dream Center in South Bend) Watch how this will influence property values in the years to come. Have you read about other "neighborhood plans" in the news? Maybe you should consider how they will influence your property tax bills. Ultimately YOU pay for these enhancements.
Advocate for Responsible TIF Use
TIF can be a powerful tool when used responsibly—to encourage necessary development that wouldn't happen otherwise. However, it is vital to hold local governments accountable to the "but-for test". If development WOULD happen without TIF funding, this tool should not be employed.
Participate in Local Elections
Ultimately, TIF districts, municipal budgets, and property taxes are guided by elected leaders. Assess whether current property values align with your interests and values, and use your vote to support candidates who champion responsible fiscal management and equity in tax policy. If you believe property values are too high, consider voting for a Mayor and Common Council who will prioritize a smaller city budget and eliminate TIF districts.