Proposed local income tax increase for Monroe County residents, tax bump for Bloomington property owners: Some details emerge

In a memo released Thursday afternoon, Bloomington mayor John Hamilton announced some details about an anticipated local income tax (LIT) increase for Monroe County.

Bloomington’s city council will be asked to enact a tax increase as soon as one month from now.

Also getting some additional detail was the issuance of $10 million in general obligation (GO) bonds that the council will be asked to approve. Issuing GO bonds will bump Bloomington’s property tax rate.

Several documents released on Thursday, and posted on a separate page on the city’s website, include a breakdown for potentially $17 million in additional annual spending by the city of Bloomington, based on additional local income tax revenues.

The broad categories of possible increased LIT spending are: climate change ($6.35 million); essential services ($2.5 million); public safety ($4.5 million); and quality of life ($3.65 million).

Under the climate change category, the biggest part ($4.85 million) could go towards public transit.

[Google Sheet compiled by The B Square]

Not part of the documentation was the income tax rate increase that would be required in order to generate the $17 million of revenue. The B Square’s calculation of the rate increase that would be required to generate $17 million is around 0.90 points.

That would increase the current LIT rate for Monroe County from 1.345 percent to 2.235 percent.

The B Square calculates that increasing the LIT rate by 0.90 points would also generate more money for Monroe County and Ellettsville government, totaling about $16.25 million a year.

After some back-and-forth with The B Square, on Friday afternoon Bloomington’s communication director Andrew Krebbs confirmed the basic arithmetic: To generate an extra $17 million for Bloomington, the LIT rate would need to increase by about 0.90 points.

Depending on how community discussion goes about the proposed projects in the next couple of weeks, not everything on the current project list will necessarily wind up as a part of the final proposal, according to Krebbs. Whatever is requested from the council in April could be less than the 0.90 points it would take to pay for everything on the list.

When Hamilton proposed a half point increase in the LIT in 2020 (which was ultimately not enacted), he took criticism for first pitching the rate increase, with a promised process later for sorting out how to spend the money. This time around, the administration is downplaying the amount of the tax increase, in favor of the project list.

Krebbs described the projects in the documents released on Thursday as “a menu of options.” “[S]ome of these projects may end up being funded and others may not,” Krebbs wrote.

Krebbs added, “But because the projects are the primary focus and the consequent LIT rate is in many ways a secondary consideration, we have not approached this as a proposal for a LIT increase.”

The proposal for issuance of $10 million in general obligation (GO) bonds was first floated in connection with budget deliberations in the fall of 2021.

The idea is to issue $5 million worth of parks bonds and $5 million worth of public works bonds this year and to issue another $10 million of GO bonds every five years.

Over the next couple of weeks, some of the projects on the GO bond list look like they will need to be winnowed out, at least for the first year’s issuance. That’s because the upper end of the total estimated cost is about $24.5 million, more than twice the amount of the planned bond issuance.

Whereas the LIT projects are heavy on operational expenses, like salaries for police officers, the GO bond project list is weighted towards capital and infrastructure projects.

For additional background on how Bloomington’s city council can enact a LIT increase for all Monroe County residents, and  how to calculate the rate that is required to generate $X in LIT revenue, see past coverage: Analysis: Refresher for possible local income tax increase in Bloomington, rest of Monroe County

The anticipated schedule of next steps is laid out by the Hamilton administration for three successive Wednesdays in April:

  • April 6, 2022: Hamilton’s presentation to the city council
  • April 13, 2022: City council discussion of LIT and GO bond legislation (first reading)
  • April 20, 2022: Final vote by the city council (second reading)

The administration’s schedule does not include  the possibility that Bloomington’s city council would approve the LIT increase by just a 7–2 vote or less. On that scenario, the the proposal would need some additional support on the Monroe County council  or the Ellettsville town council.

Below are the potential project lists for LIT and GO bonds. The same information is included in The B Square’s [Shared Google Sheet]

Table: GO Bonds Sorted by Category and Cost
Bond Type Item Min Estimate Max Estimate
Parks GO Bond Cascades Phase 6 -path/connection to Miller Showers Park $3,200,000 $3,200,000
Covenanter Drive Protected Bicycle Lanes (College Mall to Clarizz Blvd) $2,400,000 $2,880,000
W. 2nd Street Modernization, Protected Bike Lanes (Walker St to B-Line) $1,500,000 $1,500,000
N Dunn St Multiuse Path (45/46 Bypass to Old SR 37) $800,000 $960,000
Griffy Loop Trail dam crossing and community access $375,000 $375,000
Replace missing sidewalk on Rogers St. by Switchyard Park $200,000 $200,000
Replace gas powered equipment with electric equipment $25,000 $25,000
Parks GO Bond Total $8,500,000 $9,140,000
Public Works GO Bond High Street Multiuse Path, Intersection Modernize (Arden Dr to 3rd St) $2,500,000 $5,000,000
Energy efficiency retrofits for all City buildings $1,000,000 $3,000,000
City fleet vehicle hybrid/ electrification fund $1,200,000 $2,200,000
Citywide LED conversion of street lights $1,500,000 $2,000,000
Sidewalk projects (TBD) $300,000 $1,000,000
Downtown ADA Curb Ramps (e.g., W Kirkwood and Indiana Ave) $500,000 $1,000,000
Create green waste yard at Lower Cascades Park $400,000 $500,000
Citywide traffic signal retiming $42,500 $425,000
GPS for city fleet $250,000 $250,000
Public Works GO Bond  Total
$7,692,500 $15,375,000
TOTAL $16,192,500 $24,515,000

Bloomington Local Income Tax Spending Possibilities (Transit in Green)
Category Description  Annual Cost
Climate Change Major new service providing 15 minute frequency across a priority East/West corridor. This route addition would boost attractiveness and convenience for riders and reduce automobile use $2,100,000
Multiple efforts toward climate change prevention and preparedness. See Proposed Climate Action Plan Investments in “New Revenue FAQs” for more detail $1,500,000
Increase access/improve equity for people who can’t ride fixed-route BT, qualify for paratransit, require special accommodations while enhancing convenience, and expand those services. City-wide service expansion. $1,400,000
Improve convenience for all riders, boost ridership, reduce automobile use $820,000
Achieve 7-day service for greater consistency and reliability in an effort to boost ridership and reduce single occupancy vehicle use $300,000
Focus on workforce partners to develop pilot program in collaboration with the Transportation Demand Management program; explore a potential “Park and Ride” program for special event traffic management $125,000
Improve access to public transportation with a focus on workforce and low-income riders $100,000
Climate Change Total $6,345,000
Essential Services Offer incentives to attract and retain talented City employees, such as pay adjustments, hiring bonuses, creation of new positions, tuition reimbursement, relocation allowance, longevity bonuses, and/or housing assistance. $1,000,000
Replace shortfall resulting from decreased Cable Franchise Fees (cable fees lost to streaming) to fund essential IT infrastructure replacements, cybersecurity, and CATS $500,000
Meet obligations for city property & liability Insurance, materials & supplies, repair & maintenance. $500,000
Maintain aging facilities and other physical assets and replace when required $500,000
Essential Services Total $2,500,000
Public Safety Replace or repair damaged and aging facilities with new or upgraded facilites, in order to attract and retain employees and meet safety standards $1,500,000
Fund the costs associated with the contingent Fraternal Order of Police (FOP) contract $1,500,000
Consolidate public safety headquarter operations to replace current damaged and inadequate facilities and to benefit from efficiencies of scale. $1,000,000
Tailor response options for 911 calls, health and wellness checks, etc. to divert more 911 calls to non-sworn personnel. Explore combining police/fire non-sworn. $250,000
Expand the roles and increase the number of Police Social Workers and Community Service Specialists to respond to some non emergency calls for service and those calls that do not require a law enforcement response. Provide ongoing support for the STRIDE center. $250,000
Public Safety Total $4,500,000
Quality of Life Improved access to housing equity through funding assistance for the Housing Security Group/homeless; low/mod income renters; low/mod homeowners; support missing housing types $2,000,000
Direct support of low income working residents / families – possible Individual Development Accounts to match savings; focused on direct impact, possibly thru SSCAP, MCUM, Trustees, others $750,000
Funding for workforce development initiatives, including workforce reentry, re-skilling and up-skilling, and entrepreneurship training, as well as operations and infrastructure funding for the Trades District Technology Center. $500,000
Funding to improve food access and nutrition insecurity. Funding support will focus on partnerships with food service providers to address gaps in local food access for low income and food insecure residents. $200,000
Funding for maintenance of existing arts spaces, execution of the recommendations of the City’s Arts Feasibility Study and Public Arts Master Plan, and support for arts organizations. $200,000
Quality of Life Total $3,650,000
Grand Total $16,995,000

10 thoughts on “Proposed local income tax increase for Monroe County residents, tax bump for Bloomington property owners: Some details emerge

  1. Wow. A 67% increase in local income tax plus a property tax increase for general obligation bonds. Our banker mayor (Founder and director of First City Bank of DC, 1998-2015) is both a tax and spend liberal and a Chicago School/“magic of the market place” neo-liberal. Upzoning for real estate investment trusts and more taxes for the citizenry. The worst of all possible mayors.

    1. Couldn’t have said it better. Since when is expanding local governance an “essential service”? And since 75% of Bloomington Transit ridership is IU affiliates, let IU pay for 75% of the up-grade. And we don’t want our neighborhoods further carved up by “multi-use paths.” Council, derail the money train!

      1. Which neighborhoods have been “carved up” by multi-use paths? The B-Line, the 7-Line, the B-Link trail, etc. have all CONNECTED neighborhoods further by providing safe pedestrian and cyclist access.

        This is a proven way to improve car-free accessibility around the city, divert vehicular congestion, alleviate traffic violence, and increase public health. I see little downside to multi-use paths.

        The kind of infrastructure that *actually* carves up neighborhoods is large roadways, which are difficult for people (and animals) to cross safely.

    2. Dave did a great write up about how Monroe County’s LIT rate compares to other Indiana counties: https://bsquarebulletin.com/2022/03/10/local-income-tax-notebook-how-monroe-county-stacks-up-statewide/

      Turns out, Monroe is in the bottom quartile in LIT rates.
      Even AFTER the proposed 0.90 point increase (bringing the rate to 2.235%), the LIT rate would be LESS than that of neighboring counties Brown (2.52%), Morgan (2.72%), and Owen (2.5%).

      I, for one, welcome the tax increase if it means investing in public transit.

      1. Multi-use paths look great on a map, and can be very effective in newly developed areas. But when they are imposed upon fully built out old neighborhoods, they create a lot of destruction: the loss of old growth canopy trees, the loss of green yard space, and the introduction of increased impervious surface. There is also the not insignificant matter of private property rights and the mis-application of tenets of eminent domain by reclassifying private property as “public way.” Not to mention the uncomfortable truth that in Bloomington, these paths are overwhelmingly utilized by the privileged, while the tax increases bond financing imposes hits middle/low income property owners the hardest. When an area already has fully contiguous sidewalks, and one block proximity to low traffic, safe biking streets, such a project is more disadvantageous than not.

        As far as transit, the fact is that @ 75% of Bloomington Transit ridership has traditionally been IU affiliates: IU should be paying far more of the operational costs, not simply a token payment to provide a free ridership pass to their affiliates.

        If you look into the DLGF site for how the LIT is determined, you will find that comparing rates between counties is fairly irrelevant as the determination is related to total assessed value of property. It’s not a random calculation. Comparing Monroe to Owen, for example, is apples and oranges as the counties have very different total assessed values. BTW, there’s a “built-in” increase for all counties to accept as they choose.

  2. If the increase in LIT is in the categorgy of Economic Development, the City Council has the option to use population percentages for the allocation of the dollars. If that happens the City of Bloomington would get 58.28 percent of the total revenue, the county 36.96, Ellettsville 4.62, Stinesville .14. This is the breakdown sent by DLGF last week. So bottom line is the City Council has the ability to tax the entire county and nearly 60 cents of every dollar would go to the City of Bloomington.

    1. My understanding, which may be flawed, is that before a recent change in legislation the Bloomington city council could, even on a 5-4 vote, raise the tax rate for the entire county. After the change it would require 7 to 9 ‘yes’ votes on the city council to make the votes of the other units irrelevant.

      1. Re: “… before a recent change in legislation the Bloomington city council could, even on a 5-4 vote, raise the tax rate for the entire county. After the change it would require 7 to 9 ‘yes’ votes on the city council to make the votes of the other units irrelevant.”

        That is correct. For down-in-the-weeds review of that, see: https://bsquarebulletin.com/2022/02/27/analysis-refresher-for-bloomingtons-possible-local-income-tax-increase/#voting

  3. Where is the revenue going from the increased property taxes due to higher assessments of property values? Also what is the current status and use of the 1% food/beverage tax? These are recent increases we are already paying.

  4. I heard there was some recent discussion of ending the food/beverage tax, but I haven’t been following it. The last two years I think it has been used largely as Covid relief for local restaurateurs. It was supposed to go for a convention center, despite overwhelming citizen opposition. Even before Covid the county suggested they might ending the food/beverage tax after some sort of conflict with our esteemed Banker/Mayor.

    My understanding, and it may be flawed and is certainly incomplete, is that higher assessments do not result in higher property tax revenue. I’ve been reading this: https://www.in.gov/dlgf/understanding-your-tax-bill/citizens-guide-to-property-tax/

    The total amount collected cannot exceed a maximum levy. But, the maximum levy doesn’t increase much year to year. Here are the estimates for Monroe County for 2021: https://www.in.gov/dlgf/files/Monroe-200706-2021-Estimated-Maximum-Levy.pdf

    Notice that the only increase for 2021 for Bloomington Civil City is a 4.2% growth quotient and $1,860,000 for the Cumulative Capital Development Adjustment.

    If the levy is essentially fixed and assessments go up then the tax rate goes down. If assessments were to go down then the rate would go up. But there is a hard limit on what can be collected.

    So if my tax bill goes up its because my assessment has increased relative to other assessments in the tax unit. The owners of the property with the relatively lower assessment have lower tax bills. Their assessments may have gone up, too, but their percentage increase was not as high as my percentage increase. It’s sort of a zero sum game.

    And that is just the beginning. Property owners are entitled to a cap on the amount of property taxes over 1 percent of the gross assessed value for homestead properties, 2 percent for other residential and agricultural land and 3 percent for other real and personal property. https://www.in.gov/dlgf/understanding-your-tax-bill/tax-bill-101/

    …and it seems like any adjustment to reduce the tax collected on a property due to the cap is deducted from the maximum levy (although I’m not sure about that, I’ve been reading about tax increment financing, too, and I may be getting things confused).

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