Bloomington’s urban enterprise zone gets 5-year extension by city council

For at least another five years, residents who live in a roughly 2.5-square-mile area inside Bloomington will enjoy benefits like state income tax deductions and eligibility for post-secondary education scholarships.

That’s based on action by Bloomington’s city council at its Wednesday meeting, when it approved a five-year extension of the Bloomington Urban Enterprise Zone (BUEZ).

In that same 2.5-square-mile area, businesses will continue to benefit from certain tax deductions on real and personal property tax. Businesses inside the BUEZ will also have a chance to apply for matching grants to repair and maintain the facades of their buildings.

Since it was first established in 1992, the geographic boundaries of the zone have been expanded on all sides—to the north, south, east and west.

At its thickest, the zone is roughly a mile-wide, mostly west of Walnut Street. It stretches from Country Club Drive in the south to 17th Street in the north.

On Wednesday, city councilmembers were briefed on the basic history of the zone by Bloomington’s assistant director of economic and sustainable development, Andrea de la Rosa. As the assistant director for small business development, De la Rosa serves as the executive director of the Bloomington Urban Enterprise Association, a non-profit that oversees the funds that are generated by the zone.

The BUEA gets revenue based on the tax deductions that businesses inside the zone can claim. Businesses pay to the BUEA a percent of the benefit that they get from taking the tax deduction, which is called a “participation fee.”

Based on a B Square review of the Form 990s that the BUEA has filed between 2000 to 2021,  the BUEA has received about $6.8 million revenue for that 22-year period. In the same period, the BUEA has spent about $4.6 million. Of that roughly $4.6 million, about $3.7 million of it (80 percent) has been spent on its programs—not management or other administrative overhead.

The BUEA’s Form 990 for 2021 lists its total net assets at around $2.7 million.

Councilmembers Isabel Piedmont-Smith and Kate Rosenbarger both live inside the zone, which means that they are eligible to claim up to a $7,500 tax deduction for their work as city councilmembers.

At Wednesday’s meeting, both councilmembers stated their conflict of interest, but under local law  participated in the vote, after saying they would be able to participate fairly, objectively, and in the public interest despite the potential conflict.

Piedmont-Smith put it like this: “My consideration of Resolution 23-18 is not shaped by this deduction benefit. Instead, my consideration and vote will be informed by the analysis of the social and economic good that may be realized for businesses and residents if the zone is renewed for another five year period.”

In response to a question from councilmember Jim Sims, Piedmont-Smith and Rosenbarger both indicated that they were not just eligible for the tax deduction benefit, but also took advantage of it.

Councilmember Steve Volan also reported that in the past, when he lived inside the boundaries of the zone, he benefited from a scholarship to support his studies at Indiana University.

On Wednesday, Volan voted against the extension of the Bloomington Urban Enterprise Zone, based on his dissatisfaction with the way the administration of Bloomington mayor John Hamilton handled funds for a separate, and state program, that established community revitalization enhancement districts (CREDs). Bloomington’s CREDs have now expired.

Inside a CRED, businesses and residents had paid their regular taxes, and the state of Indiana had returned to the city of Bloomington part of the income taxes and sales taxes originating in those geographic areas. About $17 million in CRED funds were left unspent when the CREDs recently expired, which meant that the money was transferred to the city’s general fund, as required under state statute.

Volan pointed to what had been accomplished with investments inside the BUEZ, and wondered why “a similar effort couldn’t have been made, with more money, in the CRED district.” He added, “I’m going to be voting no on this renewal, knowing that it’s a meaningless vote—I’m sure it’s going to pass.”

On Wednesday, the renewal of the BUEZ was approved by the city council for another five years on a 7–1 vote. Matt Flaherty was absent.

[Note: The reporter is married to a BUEA board member, Mary Morgan, who serves on that group as a resident of the zone. The reporter and Morgan take advantage of the tax deduction that is available to them as zone residents.]

Bloomington Urban Area Enterprise Zone Map