Briefing
Growing the tax base.
Tax increment financing, annexation, and the other economic development tools a town under 10,000 can actually use.
What this covers
1
Why the base matters more now
Rate caps and the 2029 income tax reset.
2
TIF
What it is in plain terms, how it is set up, and where it goes wrong.
3
Annexation
Voluntary, involuntary, and the fiscal plan the law requires.
4
The other tools, and choosing
Abatement, façade programs, housing, and a decision guide.
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When the rate is capped, the base is the only thing left to grow.
Property tax levies are capped, and after 2029 income tax revenue depends on who lives inside town limits. More taxable property and more residents are the two ways a town's revenue grows without a rate increase.
Two ways the base grows
More taxable property
- New buildings and improvements raise assessed value inside town limits
- Annexation brings property that is already developed under the town's rate
- The business personal property exemption means equipment counts less than it did; land and buildings matter more
More residents
- The 2029 small-town income tax share is split by population; every resident inside the limits raises the town's share
- A city over 3,500 collects its own rate only from residents inside its limits
- Housing is now a revenue strategy, not only a quality-of-life one
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Tax increment financing, in plain terms
Freeze the base
The redevelopment commission draws an area. Whatever the assessed value is on that date is the base, and every unit keeps collecting taxes on it
Capture the growth
Taxes on new assessed value above the base go to a fund the commission controls, for a set number of years
Spend it in the area
Roads, water, sewer, sidewalks, site work, or incentives that serve the area and cause more growth
Then it ends
Newer areas expire 25 years after the first debt is issued. Then all the value goes back on the rolls for every unit
It does not raise anyone's taxes. It decides who gets the taxes on growth that would not have happened without the investment.
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How a TIF area is set up
1
The commission
The town needs a redevelopment commission; most small towns already have one on paper. It adopts a resolution declaring the area and a plan
2
The findings
The plan has to show the area qualifies and that the growth would not happen without the public investment
3
The approvals
Plan commission for consistency with the comprehensive plan, then the council, with notice and a public hearing
4
The filings and the reports
Filed with the county auditor and the state, then an annual report every year the area exists
Six to nine months from resolution to first captured dollar, and the value has to grow before there is anything to spend.
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Where TIF works, and where it goes wrong
Good uses
- Water and sewer extensions to a site a developer will build on
- The road and utilities into a housing development the town needs
- Downtown façade and streetscape work in a commercial district
- Site preparation for a known employer expansion
Cautions
- Do not draw the area around the whole town; capture growth, not the base
- School referendum levies cannot be captured; other units still feel the freeze
- Debt against captured value that never arrives is the classic failure
- Pass through value to other units when the fund has more than the plan needs
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Annexation, in plain terms
| Type | How it starts | What it takes |
|---|---|---|
| Voluntary | Owners of the land petition the town to be annexed | A fiscal plan, an ordinance, notice, and a hearing; landowner support makes it fast |
| Super-voluntary | Every owner in the area signs the petition | The simplest path; no remonstrance risk |
| Involuntary | The town initiates for territory touching its boundary | The full fiscal plan, hearings, and a remonstrance period: if 65% of owners, or owners of 75% of the assessed value, object, the annexation fails |
Waivers of the right to object, usually signed years ago in exchange for water or sewer service, still count, but under a 2019 law waivers older than 15 years no longer do.
Source: Indiana Code 36-4-3
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The fiscal plan the law requires
Before any annexation, the council adopts a written fiscal plan and a service policy. Indiana Code 36-4-3-13(d) requires it to include:
Costs by department
What it will cost each department to serve the area: police, fire, streets, utilities
How it will be paid
The taxes, fees, and other funding that cover those costs
When services arrive
Non-capital services within one year; capital services such as streets and sewer within three
The tax effect
Rates, levies, and debt service in every affected unit for four years after
Effects on other units
The township and others that lose the territory, and their taxpayers
The parcel list
Every parcel, its owner, its assessed value, and whether a waiver exists
The practical question the plan answers: does the area pay for the services it will get?
Source: Indiana Code 36-4-3-13(d)
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The other tools
| Tool | What it does | Best for |
|---|---|---|
| Tax abatement | Phases in property taxes on new buildings or equipment over up to ten years, by council designation | An existing business expanding, or a new employer choosing a site |
| Façade and downtown programs | Small matching grants for storefronts, often paired with Main Street designation and state funding | Vacant or tired downtown blocks |
| Housing TIF and regional programs | Residential TIF and READI funding for infrastructure that unlocks housing | Towns where the lack of housing is what stops growth |
| Utility extension policy | Water and sewer to new areas in exchange for annexation waivers | Growth on the fringe you want inside the limits eventually |
| Business retention visits | A standing schedule of visits to existing employers to catch expansions and problems early | Every town; most growth comes from businesses already there |
| Blight and land banking | Acquiring and clearing problem properties for reuse | Downtowns and older neighborhoods |
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Which tool for which situation
| The situation | The tool |
|---|---|
| A site that needs water, sewer, or a road before anyone will build | TIF, sized to the project |
| Developed land on the fringe already served by town utilities | Annexation, voluntary where possible, with the fiscal plan |
| An existing business deciding whether to expand here | Tax abatement, and a retention visit before they decide |
| Empty storefronts downtown | Façade program, Main Street designation, and a downtown TIF for the streetscape |
| No houses for people who work here | Residential TIF for the infrastructure, plus regional housing funds |
| Growth you want, on land that is not yet yours | A utility extension policy with annexation waivers, so it comes in later |
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How Civic & Main helps
1
TIF setup and administration
Reviving the redevelopment commission, the area and plan, the findings, the approvals, and the annual reports after
2
Annexation
The fiscal plan, the service policy, the waiver review, and the ordinance and hearing calendar
3
The strategy
Which tools fit which sites, an abatement policy, a retention visit schedule, and the grant pipeline for the infrastructure
Fixed fee, quoted in writing. Works with the town, the redevelopment commission, and the county together.
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Next steps
A free 30-minute consultation
Bring three things and you will leave with a first read on which tool fits and what it would take.
- The parcels or areas you have in mind, on a map
- Your comprehensive plan, if you have one, and whether the redevelopment commission exists
- Any waivers or utility agreements on file for the fringe
info@civicandmain.com
civicandmain.com
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Sources
- Indiana Code 36-7-14, redevelopment commissions and tax increment financing; Indiana Code 36-7-14-39 on allocation areas
- Indiana Code 36-4-3, annexation, including 36-4-3-13(d) fiscal plan requirements, remonstrance thresholds, and the 2019 limit on waivers older than 15 years
- Indiana Code 6-1.1-12.1, property tax abatement (economic revitalization areas)
- Indiana Department of Local Government Finance, TIF and annexation guidance; Indiana Office of Community and Rural Affairs, Main Street and community development programs
- Accelerate Indiana Municipalities, economic development and annexation resources
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