The research center where I work recently released a study on the effects of Tax Increment Financing in Indiana counties. That study reported findings that echoed many earlier studies of TIF use in other places. While it is clear that the area inside a TIF district grows, we found that the area outside a TIF district tends to have higher property tax rates, reduced business investment and lower levels of employment.

More worrisome is the fact that over the past decade the amount of property within TIF districts has doubled, while overall, the amount of property outside TIF districts has declined. Taken together these data and analysis suggest Indiana policymakers take a much closer look at the use of TIFs in Indiana. That is what we recommended, but to do away with TIFs entirely would be a mistake.

Our study, like others of its kind, looked at the average effect of TIFs over time. With several hundred TIF districts in 80 plus counties, the average masks much variation. There are doubtless hundreds of examples of wise TIF use around the state. One need only visit downtown Fort Wayne, a Toyota plant in Princeton, or a hundred other places to see models of wise use of TIFs to pay for public infrastructure.

­There are also plenty of bad TIFs, where promised jobs and investments failed to materialize, leaving local businesses and taxpayers with higher tax rates or worsened public services. I hesitate to call them out individually because, like private investment, public investment is a risky matter. Still, there is sufficient misuse of TIF financing that nearly every public sin can be tied to one of them.

­We must also appreciate that TIF use is not necessarily the enemy of schools or other local government units. In fact, school boards ought to be the strongest allies of thoughtful TIF use. Investments that help lure new families to a district will more than pay for themselves through the state school funding formula.

­As we go about studying TIF use, we should all understand that Indiana's local public finance system is not sustainable in its current form for a variety of reasons (including the property tax caps) and TIFs are symptomatic of the problems. In the coming months we must strive to better understand the characteristics of good and bad TIFs using data, not just anecdote. We must also focus on the spending of tax dollars collected through TIF. A good deal of the problem might simply lie in the unthoughtful approach many use in justifying TIF as a short-term job attraction tool, when it is really more often a tool for long-term growth.

­We have to get much, much better at analyzing the economic (not just accounting) effects of TIF projects, both within and outside the TIF district. This analysis has to be done before we make the deal. Finally, we have to absorb these lessons in local government financing. We need to do this well to create a modern model of local government finance in Indiana.