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Proposed by Mayor Hamilton January 1 and elaborated upon in his February 20 State of the City address, the fund would provide means to foster equitable and sustainable economic development as the community confronts the local effects of climate change. Over the next decade, a proposed 0.5% increase in the local income tax for Monroe County residents would raise approximately $160 million (of which City and County government would each receive approximately $80 million) for sustainable economic development. In order to be adopted, the tax must be passed by the Local Income Tax Council, which comprises the Bloomington Common Council, the Monroe County Council, and the Stinesville and Ellettsville Town Councils.

 

Public Engagement

Ongoing: Public Comment Form
March 5: Meeting at the Mill–Video Presentation and Slides 
March 11: Climate Action and Resilience Committee, 6:30–9:30 p.m., Council Chambers

 

Frequently Asked Questions

Frequently Asked Questions about a new Local Income Tax to support a Sustainability Investment Fund.

 

What is a Local Income Tax?

The Local Income Tax often referred to as LIT, is an income tax paid by individuals. It is a proportionate tax, meaning that low-income residents pay less tax than higher-income residents.  If the individual lives in a municipality which collects a LIT, then the tax is paid to that municipality. If the individual lives outside of municipal boundaries, then the tax is paid to the county where the individual resides. The LIT rate for Monroe County is currently 1.345% of adjusted gross personal income for Monroe County residents. Counties statewide collect LIT. 

 

Why is it called a Local Income Tax?

Indiana reformed its local income taxes during the 2015 legislative session, and the new set-up took effect in 2017. The old income tax acronyms, CAGIT, COIT, EDIT, and LOIT, were replaced. Indiana now has LIT, for local income tax, with a single rate and a collection of revenue categories for various uses. 

 

What is our current Local Income Tax rate?

The LIT rate for Monroe County is currently 1.345% of adjusted gross personal income for Monroe County residents. Counties across the state collect a LIT. 

 

What is the proposed increase percentage for the Local Income Tax?

The proposed increase is 0.5 %, bringing the total tax to 1.845% of adjusted gross personal income. 

 

Is the tax just for City residents or would it apply to all residents of Monroe County?

Local income taxes are county-specific; so the LIT would apply to all Monroe County residents.

 

How much revenue would the additional tax generate?

The proposed additional tax rate of 0.5% could generate $16 million per year, 51.19% of which would be allocated to the City of Bloomington funding sources and 45.95% to Monroe County funding sources. Ellettsville and Stinesville would receive 2.84% and .02% respectively. 

 

What can a Local Income Tax be used for? 

The State tax code permits the Local Income Tax to be used for the following purposes, now referred to as “revenue buckets”:

  • Public safety (fire, police, emergency medical and dispatch services)

   (currently at .25%)

  • Economic development (projects promoting employment opportunities, attracting major new business enterprises, retaining or expanding existing businesses, and various expenditures related to such projects. See e.g. IC 6-3.6.2.8 and IC 6-3.6-10-2)  

   (proposed at .50%)

  • Correctional or rehabilitation facilities and Special purposes (In Monroe County--juvenile detention centers and juvenile services) (currently at .009%)
  • Property tax relief (to reduce property tax bills for taxpayers)
  • Certified shares (for any purpose of the taxing unit) 

   (currently at 1.00%)


 

What are the current tax rates in other counties in Indiana?

Of Indiana’s 92 counties, Monroe County’s tax rate is the 22nd lowest.  The following are 2019 Local Income Tax (LIT) total rate percentages for some similar mid-sized Indiana cities:

 

City

LIT Tax Rate

Bloomington

1.345%

Carmel

1.00%

Fishers

1.00%

Lafayette

1.10%

Columbus

1.75%

Fort Wayne

1.48%

Evansville

1.20%

Kokomo

1.75%

Terre Haute

2.00%

South Bend

1.75%

Muncie

1.50%

 

 

Do all Indiana counties have a tax like this?

All 92 Indiana counties have a Local Income Tax. Of Indiana’s 92 counties, 73 of them (79%) devote some of their Local Income Tax to local economic development. The following chart was drawn from the Indiana State Budget Agency’s report of Local Income Tax Distribution Amounts.  With population as the primary ‘peer’ metric, all of the counties listed are within 50,000 of Monroe County’s population. Of these values, the average % Used for Economic Development is 0.25%. 

 

Geographic Area

2018 Population Estimates

% LIT Expenditure Used for Local Economic Development

Total LIT %

       

Elkhart County

                                      205,560

0.25%

2.0%

Tippecanoe County

                                      193,048

0.40%

1.28%

Vanderburgh County

                                      180,974

0%

1.20%

Porter County

                                      169,594

0.50%

0.50%

Hendricks County

                                      167,009

0.25%

1.70%

Johnson County

                                      156,225

0%

1.20%

Monroe County

                                      146,917

0%

1.345%

Madison County

                                      129,641

0%

1.75%

Delaware County

                                      114,772

0.40%

1.50%

Clark County

                                      117,360

0.25%

2.00%

LaPorte County

                                      110,007

0.45%

0.95%

Vigo County

                                      107,386

0.50%

2.00%

 

How will this tax increase be used? 

The proposed tax increase would support the long-term economic sustainability of our community, funding eligible economic development projects that promote the growth of our economy while also addressing current and future effects of climate change. 

 

 

What City investments could the tax increase support?

Some examples might include:

  • Mobility investments, such as expanding or enhancing transit options,

including micro-transit, creating new bike paths or bike lanes and/or connecting existing ones, adding new, pedestrian investments, including sidewalks and intersection improvements;

  • Attracting green businesses and industries to our community;
  • Enhancing the ability of our infrastructure to withstand the effects of global warming, including increased rain and heat events;
  • Building enhancements, including implementing energy-efficient building practices and incentivizing adaptive reuse; 
  • Expanding renewable energy sources, including increasing solar installation at City facilities, facilitating increased residential installation, designating energy districts, and supporting renewable energy expansion to underserved communities;
  • Developing affordable/workforce housing.   

The other taxing bodies (Monroe County, Ellettsville, Stinesville) would decide how best to use their proceeds from the LIT.

The list above describes only some of the possibilities. Decisions about exactly how the City’s Sustainability Investment Fund will be used will not be made until robust public education and engagement takes place.  But we start this engagement process knowing from resident surveys that our residents want us to undertake this critically important effort, which benefits our community and our citizens today and well into the future. 

 

Why do we need this tax increase?

The future viability of our community depends on growing the economy and continuing to provide adequate services to residents. The world is changing and communities like ours will be well placed to grow sustainably both from an economic and environmental perspective. This will ensure our community’s ability to nurture and protect not only established homes, businesses and industry, but attract new businesses for increased job opportunity and new residents who can contribute to the culture and vitality of our community.

 

What is the process for getting this tax approved?

A new Monroe County tax may be proposed by the Bloomington City Council, the County Council, the Ellettsville Town Council or the Stinesville Town Council. These Councils together form the “Local Income Tax Council” for Monroe County. The Councils can meet together to vote, or each council may vote on the proposed tax separately. Each council is afforded a certain number of “votes” based on population. Because a majority of Monroe County’s population lives in Bloomington, Bloomington’s City Council has a majority share of the “votes.”

 

When would the tax take effect?

If adopted before September 1st, the tax will take effect on October 1, 2020. If adopted after August 31st but before November 1st, the tax will take effect on January 1, 2021.  If adopted after October 31st but before January 1st, 2021, the tax will take effect on October 1, 2021. 

 

How many new taxes or raised taxes have been enacted since 2016?

Two. The public safety local income tax was increased by .25% in 2016 to fund police, fire, and dispatch improvements that protect us all. The food and beverage tax, approved by County Council and enacted in 2018, was a new 1% sales tax placed on retail sales of prepared food and beverages and will be used to fund a convention center expansion and other tourism-related projects.

 

Won’t this tax have a disproportionate impact on low-wage earners?

Not at all.  Unlike a flat tax on purchases, this tax is proportionate to income, so low-wage earners will owe less than those with greater incomes.  Furthermore, the funds generated by the tax will have a greater positive impact on low-wage earners, who are most vulnerable to the effects of climate change.  Using the tax revenues to build affordable/workforce housing, help businesses develop resilience, and attract new employers to the area could benefit low-wage earners in particular.

 

Where can I find more information about economic sustainability and climate change? 

We encourage you to check out the Reading/Resources List below:

1. Equitable & Just National Climate Platform

2. ERI Fact Sheets on:

3. Indiana Climate Change Impacts Assessment (Purdue University)

4. Strategies for Climate Change Adaptation (IU ERI)

5. Bloomington’s Sustainability Action Plan

6. Examples of similar initiatives in other cities: 

7. United Nations Sustainable Development Goals

 

Feedback?

Public engagement on this topic begins now. We want to hear from our residents and encourage you sharing your comments and suggestions about the proposed increase to the Local Income Tax here. Additional opportunities to learn more about the benefits this new funding source could offer and to provide continued feedback will be announced throughout the spring and early summer of 2020.