Committee debates tax abatements and TIF accounting as members warn of 'ghost money' and potential impacts on schools
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Summary
Members spent substantial time discussing whether tax abatements and TIFs are properly reported to the auditor; Representative Keith Lee said lack of statutory reporting can let abatements be treated as revenue ('ghost money'), shifting the foregone revenue onto other taxpayers; no formal action taken and members requested further analysis.
Members of the House Tax Committee spent a large portion of the working session scrutinizing how local tax abatements and tax-increment financing (TIF) interact with levy calculations and whether the auditor’s office has the statutory tools it needs to account for abatements correctly.
Representative Keith Lee told the committee the auditor’s office has indicated there is no requirement that all special taxing jurisdictions or abatements be reported to the auditor; without consistent reporting, abatements can remain in levy calculations as if they were not foregone revenue, effectively shifting the cost to other taxpayers. Lee said the bill language being developed would require abatements and similar economic incentives to be calculated into total revenue so taxing jurisdictions do not rely on unrecorded “ghost money.”
“If the auditor's office doesn't know about the TIF district ... what you end up with is they can calculate based on the levy as if the TIF wasn't put into place,” Representative Keith Lee said, describing the effect as creating phantom revenue. Several members—most notably Representative Boiko—pushed back, arguing that when communities approve TIFs or abatements they are exercising local control and that the consequence can be complicated when layered over prior voter decisions about levies.
Committee members used a $1,000,000 levy and $100,000 TIF hypothetical to explore mechanics: if a jurisdiction’s total levy is recalculated without subtracting the abated amount, the remaining taxpayers can effectively make up the foregone revenue. Representative Boiko and other members said voters and local officials have remedies—tax-rate hearings, voluntary rollbacks or school-board elections—but others said clarity in statute is necessary to prevent inadvertent tax shifts.
Members also debated how new construction should be classified: Chair Taylor offered two examples (a senior-living development that brings no schoolchildren, and rebuilding in the same footprint) to show why a one-size-fits-all new-construction rule may be unfair, while Representative Murphy described a large mall redevelopment that created new families and increased school demand.
No formal action or vote occurred; members asked staff to circulate draft language, urged referrals to legislative research for fiscal analysis and signaled further discussion is needed before text is finalized.