LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 7746 NOTE PREPARED: Feb 17, 2025
BILL NUMBER: HB 1561 BILL AMENDED: Feb 17, 2025
SUBJECT: Tax Increment Financing.
FIRST AUTHOR: Rep. Clere BILL STATUS: CR Adopted - 1
st
House
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
DEDICATED
FEDERAL
Summary of Legislation: (Amended) Establishing a TIF Project: This bill requires a redevelopment
commission to include an invitation to overlapping taxing units to participate in the hearing regarding the
redevelopment project. It requires the redevelopment commission to include a record of overlapping taxing
unit attendance in its annual report to the Department of Local Government Finance (DLGF).
Accelerated Debt Repayments: This bill provides that a redevelopment commission may use money from
certain funds for the purpose of paying more toward debt service obligations, in order to retire debt service
earlier, regardless of whether that use is listed in the redevelopment commission's annual spending plan. It
provides that a redevelopment commission making accelerated debt payments may retain the assessed value
associated with the original debt service schedule. It also provides that early debt retirement applies only if
the early defeasance of debt is allowed according to the bond issuance documents.
Expenditure Area: The bill provides that allocated property tax proceeds that are otherwise authorized to be
expended for purposes related to a redevelopment project that is located outside the boundaries of the
allocation area may be expended for those purposes only if the redevelopment commission immediately at
the conclusion of a public hearing adopts a declaratory resolution, and the applicable legislative body votes
to approve the declaratory resolution that finds that it has been clearly demonstrated that the expenditure:
(1) will directly benefit the allocation area; or
(2) will result in the creation or retention of jobs in the private sector and provide an estimate of how
many jobs will be created or retained over a specified time period.
It provides that the adoption of a declaratory resolution and subsequent legislative body approval are not
required if the expenditures for purposes related to a redevelopment project that is located outside the
boundaries of the allocation area are for:
(1) infrastructure;
(2) utilities;
(3) drainage; or
HB 1561 1 (4) environmental remediation.
It also provides that the expenditure allowance does not apply to any transfer of property tax proceeds to a
school corporation, an accredited or nonaccredited public or private school, or a charter school. The bill
enumerates permissible infrastructure maintenance expenditures.
TIF Allocations: The bill provides that a redevelopment commission may use its discretion, where excess
assessed value amounts are not already explicitly set aside for use within the current calendar year for a
purpose under a current development plan, to allocate excess assessed value amounts to the respective taxing
units rather than reserving those excess assessed value amounts for future or indefinite purposes.
TIF Extensions: The bill prohibits a redevelopment commission from adopting an amendment to a
declaratory resolution that contains an allocation area provision that extends the expiration date of the
allocation area provision. It provides that after the expiration of a previous allocation area provision, a
redevelopment commission may adopt a declaratory resolution, or an amendment to a declaratory resolution,
that contains a new allocation area provision with a new expiration date, and for which the county auditor
in which the unit is located shall compute the base assessed value for the allocation area using the assessment
date immediately preceding the effective date of the new allocation provision of the declaratory resolution
or amendment. It also provides that, with regard to the prohibition of a redevelopment commission adopting
an amendment to a declaratory judgment that contains an allocation area provision that extends the expiration
date of the allocation area provision, a redevelopment commission is not prevented from removing parcels
from an existing allocation area before its expiration date or adding parcels to a new allocation area.
Specified Account: The bill allows a redevelopment commission to, pursuant to the approval of the local
legislative body, create an account for a specific infrastructure purpose.
Redevelopment Commission Report: The bill requires a redevelopment commission to provide to the unit's
executive and fiscal body an analysis of revenues and expenditures on a per allocation basis and correlate
the analysis with the required spending plan. It provides that in jurisdictions where a redevelopment
commission has not returned any amount of assessed value in the preceding three years, the redevelopment
commission must identify relief measures that could be implemented to alleviate taxpayer burdens. It also
requires a redevelopment commission to report its findings in its annual report. It exempts jurisdictions where
the excess assessed value determined by a redevelopment commission is expected to generate less than 200%
of the amount of allocated tax proceeds necessary to make, when due, principal and interest payments on
certain bonds plus the amount for certain other purposes.
Effective Date: (Amended) Upon passage; January 1, 2025 (retroactive); July 1, 2025; July 1, 2026.
Explanation of State Expenditures: (Revised) Department of Local Government Finance (DLGF): The
bill’s provisions pertaining to the additional items that are to be included in the annual report from the
redevelopment commissions submitted to the DLGF will result in a temporary increase in the administrative
workload for the DLGF. The DLGF will need to make to the requisite programming updates to the TIF
Management application on the Indiana Gateway for Government Units transparency portal in order to
account for these additional items that will be included in the submission.
Explanation of State Revenues:
Explanation of Local Expenditures: (Revised) Establishing a TIF Project, Expenditure Area, Specified
HB 1561 2 Account, Redevelopment Commission Report: This bill’s provisions pertaining to these italicized sections,
which are described in the Summary section above, will result in an increase in the administrative workload
of redevelopment commissions to implement.
Accelerated Debt Repayments: This bill’s provisions will allow redevelopment commissions to make
accelerated debt payments even if the accelerated payments are not listed in the plan. If a commission makes
accelerated debt payments, the AV increment associated with the original payment schedule may be retained.
(Revised) County Auditors: The bill’s provisions pertaining to a redevelopment commission’s combining of
traditional TIFs and housing TIFs being established in a New Markets Tax Credit area may result in an
increase of fiscal expenditures for county auditors since their property tax management software systems
would need to be updated to account for a TIF district where both these types of TIFs are combined into one
overall district.
Explanation of Local Revenues: (Revised) TIF Allocations: Under current law, each redevelopment
commission must annually determine the amount of allocated tax proceeds that will exceed the amount
needed to make debt payments and pay other expenses. If the excess revenue amount exceeds 200% of the
amount needed, the commission must submit to the unit’s legislative body its determination of the proposed
excess AV amount to be passed through to the units. The legislative body may approve or modify the AV
pass-through amount. Under this bill’s provisions, the commission may use its discretion in allocating excess
assessed value amounts to the respective taxing units rather than reserving those excess assessed value
amounts for future or indefinite purposes. If additional AV is passed through to the taxing units, tax rates
would be reduced, resulting in higher taxing unit revenues due to lower tax cap losses. The bill also
encourages redevelopment commissions to make allocations from existing TIF areas to school corporations.
This bill contains a provision that if a proposed redevelopment project area is not taxable at the time the
allocation area is being established, any property taxes that would have been paid on undeveloped land shall
be included in the base AV for purposes of determining property tax levy distributions to the appropriate
local units. Some taxing units may receive increased revenue in the future if currently exempt, undeveloped
land is included in a new TIF allocation area. The AV of the undeveloped land will be added to the taxing
units’ AV bases. The additional AV will reduce tax rates and shift some taxes to the land under
redevelopment from other taxpayers. The reduction in taxes charged to the other property owners may reduce
the impact of the tax caps, which will then provide additional revenue to the units. The allocation area will
produce less taxes for use by the redevelopment commissions than it would under current law.
(Revised) TIF Extensions: The bill prohibits the extension of a TIF area upon expiration. Instead, the bill
permits a new TIF area to be established in its place. The base AV of the new area would reflect the AV
when the new TIF is created so all of the AV in the former TIF would flow to the taxing units. The higher
taxing unit base AV reduces tax rates and increases taxing unit revenue due to reduced tax cap losses.
Furthermore, the bill does not prevent a redevelopment commission from removing parcels from an existing
allocation area before its expiration date or adding parcels to a new allocation area.
State Agencies Affected: Department of Local Government Finance.
Local Agencies Affected: Redevelopment commissions; Local civil taxing units and school corporations;
County auditors.
Information Sources:
HB 1561 3 Fiscal Analyst: James Johnson, 317-232-9869.
HB 1561 4