Remarks to City Council on ED-LIT Proposal

Why are we here? What is the problem we are trying to address?  We are here because city revenues do not match our needs. Nor our challenges. Nor our values. Like we did in 2016, when we acknowledged that revenues for public safety did not match our community’s needs and expectations (for well trained, equipped, and funded public safety systems), and this Council passed a 0.25% PS-LIT. Today, our community is reeling from a pandemic and the resultant economic recession. We need to help our families get jobs. We need to protect each other with a strong social safety net, and to ensure that economic recovery forward is inclusive and just, for everyone. We also need to address racial injustice that persists in our community. And we need to do our part responding to the climate emergency. These are very big challenges, and it’s important to mention that our basic government services are also under stress. We expect to face significant revenue pressures in the coming 2-4 years, as a result of the recession and of increased demands for service.

The positive news is that as we address these challenges, we will be creating the kind of community that matches our values and will offer a higher quality of life to all, and particularly to those in our community who struggle to meet their family needs and fulfill their opportunities. 

More positive news is we already have taken or are taking appropriate steps. With important investments over the past several years. And with Recover Forward part 1, for 2020, w $2 million being deployed as we speak, toward these goals. And with Recover Forward part 2, embedded in the 2021 budget that we’ve outlined, and will work together on in the coming weeks. Tonight is about part 3, how we assure ongoing commitment to and investment in this progress. To help Bloomington recover and thrive.

I’m here tonight to urge the City Council to support an Economic Development Local Income Tax or ED-LIT increase of 0.25%. To generate about $4MM/yr to address these challenges and help our families move ahead. Will discuss the kinds of investments below.

Briefly on the How: we propose to create a new separate and discrete city fund, into which ED-LIT revenues will flow, and from which they will be appropriated annually. Under state law, a Capital Plan is to be provided by the executive to guide expenditures, and I commit to you that we will work together to develop that plan annually, with full and regular transparency, and accountability to, and input from, our community. In a few minutes, I will be presenting AN outline of a POTENTIAL plan. But it’s critical to note this is just a preliminary outline. It shows some of what is needed, and what can be accomplished with this ED-LIT. (It also shows many things that cannot be achieved without it.) But ahead of us is a lot of dialogue and collective planning to refine an actual plan, after the ED-LIT is enacted.

Let’s consider the When of the ED-LIT. As you know, to generate additional local revenues, there are few choices beyond a LIT. Property taxes are determined by state formula, with a prescribed growth in the levy each year that we cannot exceed. Most other revenue sources are similarly formulaic, such as the gas tax or state or federal appropriations. The state legislature has allowed basically only the Local Income Tax as how local governments can achieve needed revenues. They have also established the LIT Council and very specific voting procedures to adopt a LIT. 

If the ED-LIT is in place before November 1, it becomes effective January 1 next year. We know the legislation has indicated concern about even the current LIT approach. The past session, earlier this year, (after I announced plans to pursue), they changed voting, to limit the ability of cities with the majority of votes in their counties to enact a LIT. And this provision lapses May 2021, clearly indicating plans to adjust again in the coming session. Some legislative proposals this past spring would have removed a city’s ability to vote altogether. That is, it is not clear the LIT Council and we will have the authority effectively to enact this revenue after 10/31 (legislative change in spring could remove any tax not in place already.)

So Who needs to act: to pass before 10/31, need City Council to act by 9/16, to allow other jurisdictions of LIT Council their statutory chance to weigh in, vote, discuss, hear from the public, etc. So full LIT Council, as established by state law, can review and act on the proposal. (as we did in 2016).

Two important asides: We are following the LIT rules established by the state legislature. It’s important to note that for many years, municipalities have sought permission from the legislature to enact their own LITs. Repeat that.  But the legislature has always denied that local authority and required countywide taxes. We absolutely will seek again this coming year that city authority -- and look forward to pursuing that with our county colleagues. And let me say tonight clearly if the state legislature finally does give municipalities that authority, and if other local jurisdictions decide they don’t want/need the revenue after this ED-LIT is passed, I would and will advocate to rescind this ED-LIT and pass a city-only LIT.  But let me be equally clear tonight, that I do not believe we can let the city’s future depend on the benevolence of the state legislature. By enacting the ED-LIT we are protecting our future, while also preserving indeed perhaps supporting the opportunity to work with the legislature to encourage additional flexibility. All of that weighs in the timing of this LIT.

A second aside is about the nature of the LIT. It is a flat tax on household income reported to the state. We are not allowed to impose a progressive income tax. (I’ll share data about that in a moment, but again, the hand we are dealt with is the option of a fixed LIT). I will look forward to appealing to the legislature to encourage more just and appropriate progressive local tax options as well.

Back to the main question and to conclude this intro with the principles involved. Budgets are our values. Beyond the basic services, we must assure, of course, public safety, infrastructure, regulation, our budgets embody what we value for our community and our people. We in Bloomington invest in the quality of life, and we believe in opportunity for all. In these very challenging times, we must be countercyclical, we must assure that our community invests in economic justice, so some people aren’t left behind -- now, or as we recover. We must invest in racial justice, so we continue our progress to overcome the legacies and present realities of racial discrimination deep in our country’s and community’s history. We must embrace the challenge of the climate emergency, understanding this is a collective responsibility, requiring collective action, and that means us. We do all this, knowing that as we invest in these values, we are investing in each other, we are investing in a better future. In all this, our investments must steer toward those most in need, to assure the value of new revenues is an investment in the future of all.

Now I’d like to share some visuals and details. First as to tax capacity. Increasing revenues always should be done only when needed to achieve important goals. And we should be sensitive to overall tax rates. It’s very important to note that we in this very progressive community have very low tax rates relative to our peers. Four charts to share briefly.  US.  Indiana.  Bloomington.  Monroe County. 

As many of us would strongly believe a progressive tax is better than a flat tax, I wanted to share what information we can gather about who pays the LIT tax, and how the burden is shared through our community. One more chart as best we can predict. From Reedy Financial Group. (Reminder: Imperative to invest resources to help those least able to pay, most in need of support.) 

Balance between sharing potential plan, with details, versus recognizing community input, council input, for any ultimate plan. But to propose some key investments to put our values into our budgets, I’ll outline a potential Capital Plan. Again, this notes what we can do with revenue. And what we generally cannot do without the revenue. Begin with the overview slide. 5-year plan. 

...Lower Energy Use / Cost for Build Environment...Improve Mobility Options...Improve Local Food / Other Quality of Life...Job Supports...Housing Support...City Govt Infrastructure.

Closing: these investments are crucial, and they are focused on lifting our whole community up and meeting our challenges. Putting our values into action. When people are struggling, our whole community is struggling, why seek these revenues? Because the government is here to make lives better, to invest these funds to improve lives. To build a better future especially for those at risk. To lower energy bills and save families cash every month. To improve non-auto mobility options to eliminate the need for a car. To bolster our social safety net with more Jack Hopkins funds that will serve tens of thousands. To help protect hundreds of people experiencing or at risk of homelessness. To help individuals struggling to get into the workplace, or back into the workplace, or to get a better-paying job. To support child care for low-income working families. To help local farmers and local artists make a living. To help bridge the digital divide. To help first-time homeowners actually purchase that home. To plant hundreds of trees, especially in underplanted areas of the city. This is government investing in our future. 

These are investments worth doing. If we DO NOT pass the ED-LIT, we will not be able to do these things and things like them. We will face serious restrictions on our ability to meet basic services and help in the recovery. 

Some friends and colleagues in county government have indicated their opposition to this proposal. I respect their views of their own needs, and of course they will have flexibility of how to use the revenues that would come to them -- whether to allocate to other jurisdictions, or strengthen reserves for tough times ahead, or otherwise redistribute them. And we look forward to working together to convince the legislature to give us all more flexibility. But for us, in Bloomington, this is the choice to put our progressive values into action, to be countercyclical, and to help recovery to include all of us, and move us closer to economic, racial and climate justice. I strongly encourage your support for this ED-LIT proposal and welcome your questions and comments.

Phase Three: Local Income Tax Presentation–Click here.