For decades, Indiana has utilized tax-increment financing (TIF), an instrument by which future property-tax revenue is captured to pledge for borrowed funds for capital investment. It nonetheless remains controversial. We need to ask why.
Debt, or leverage, is a simple idea, and businesses employ this decision model routinely to weigh the risk and reward of borrowing money to make capital investments with the expectation that increased utility or efficiency will generate incremental (marginal) revenue. Businesses employ various forecasts to determine the probability of hitting projected growth targets, and decide to borrow or not borrow based on the cost of money.
Easy, right? The problem, some point out, is that TIF doesn’t work like this business model.