Tax increase forum | One table says: Spend climate action money directly to benefit low-income people

“Lift the people up. Once you’ve got a sustainable model that is working for the people at the bottom, then you can have my 50 cents.”

That’s what Patrick Cortese, an educational publisher, told a Bloomington city official last Thursday night. The occasion was a community meeting about taxes held at The Mill, a downtown co-working space.

Cortese was talking about the idea of increasing the county’s local income tax to pay for climate action initiatives.

The 50-cent figure comes from the amount of the proposed tax increase, which would raise the existing tax by .05 points. That works out to 50 cents for every $100 dollars earned by a wage earner in Monroe County.

Thursday’s gathering at The Mill was the first public meeting on the tax increase since mayor John Hamilton’s New Year’s Day proposal. Hamilton’s idea is that Monroe County’s local income tax should be increased by a half point, to fund climate action initiatives.

Annotated Single Bar Makeup of Monroe County LIT

That would bring the total income tax levied on county residents to 1.845 percent. A simple five-vote majority on the nine-member Bloomington city council could enact the tax increase on residents across the county.

Using an increase to the local income tax to pay for climate action programs is an idea that predates the mayor’s announcement. That’s a point that councilmember Matt Flaherty made in his remarks on Thursday to the room full of about 120 people—counting several elected officials, candidates for office, reporters from half a dozen news outlets, and more than 20 city staffers.

The evening began with a pitch for the tax—from Flaherty, Lauren Travis (the city’s assistant director of sustainability), Andrea Webster (implementation manager at Indiana University’s Environmental Resilience Institute) and the mayor. The presentation was recorded by CATS and can be found online under the title “Meeting at The Mill.

The half-hour pitch was followed by four 20-minute breakout sessions at seven tables. The tables had themes like housing, food, infrastructure and transit. The Square Beacon’s coverage of the breakout sessions is confined to a single table with the theme “finance and economic equity.”

It was during a breakout session at that table when Cortese conveyed to the city’s director for economic and sustainable development, Alex Crowley, his thoughts about giving up 50 cents for every $100 of income.

Before diving into the discussion at Crowley’s table, this article aims to clarify some key points in the opening presentation: the way that votes on the tax council are allocated; the way the tax could be allocated; and how individual taxpayers are affected.

How the tax works: Voting shares

One criticism that’s been made of the tax proposal involves the way the state statute sets up voting shares for the members of the tax council. The tax council includes four governing bodies in the county: the Monroe County council, the Bloomington city council, the Ellettsville town council and the Stinesville town council.

The votes are allocated in system that’s somewhat similar to the way the Electoral College works. Each of the governing bodies are allocated a number of votes out of 100. The shorthand description that’s often used to describe the allocation is the same one used Thursday night: The voting share of a governing body is assigned proportionately by population.

That description is accurate for cities and towns, but not for the county government. For example, Bloomington’s city council represents 58 percent of the counties population and is allocated 58 of the 100 votes on the tax council.

But for the Monroe County council, the allocation of votes is not based on the proportionate share of the county’s population that the county council represents. If it were based on the county council’s proportionate share, the county council, which represents the entire county, would be allocated 100 percent of the votes. Instead, the county council is allocated the leftover portion of the votes not assigned to cities and towns. That works out to 37 votes.

How the tax works: Representation on the tax council

Another kind of criticism flies under the slogan, “Taxation without representation.” Technically, the slogan does not accurately describe the tax council situation, and is often countered—as it was implicitly during Thursday night’s presentation—with a statement along the following lines: Everybody is represented on the tax council, but the elected group that represents you depends on where you live.

That counter does not address the numerical inequality of representation that comes with the place you live. It also doesn’t address the bloc assignment of votes.

For a Bloomington resident who wants to encourage their tax council representation to vote against a tax increase, there are eight elected officials they can hold accountable at election time. Those eight are: three at-large city councilmembers; a district representative on the city council; three at-large county councilors; and one district representative on the county council.

For a resident of an unincorporated part of Monroe County, there are just four officials they can hold accountable: three at-large county councilors and a district representative.

On top of that, the votes by each governing body in the tax council are made in a bloc. The effect of bloc voting is that anyone living outside of the city of Bloomington is without any practical representation on the tax council. The bloc-wise assignment means a simple 5–4 majority on the Bloomington city council in favor of a tax increase would allocate all 58 votes, thus enacting the increase on all county residents.

How the tax works: Allocation of proceeds?

What’s proposed is a new kind of local income tax (LIT) for Monroe County, which is not currently being levied. The new category is “economic development.”

Under the state statute, there are two ways the tax proceeds from the economic development category of the LIT could be allocated to the different jurisdictions in the county. One is based on the amount of property taxes paid. The other is based on the proportionate population for cities and towns with the leftover amount going to the county government.

In Monroe County, if a 0.5-point increase is enacted, the choice of allocation method would make a difference of about a couple million dollars. Based on a presentation given by council councilor Geoff McKim last year at a transit panel hosted by the Greater Bloomington Chamber of Commerce, the property-tax distribution method for a 0.5-point LIT increase would yield around $8 million for the city of Bloomington. That’s the figure that mayor Hamilton has put forward as the ballpark number it would generate for the city of Bloomington. Based on McKim’s presentation, another roughly $9 million would go to other jurisdictions in the county.

In McKim’s presentation, he analyzed a potential 0.25 point increase, not the 0.5 point increase currently being discussed. Extrapolating from McKim’s presentation, the 0.5 rate, if it’s allocated based on population, would generate closer to $10 million, with the other jurisdictions getting closer to $7 million.

Other governing bodies in the county could decide independently how to spend the money it receives from the tax increase, even if Bloomington’s city council decides to spend Bloomington’s distribution on climate action programs.

During Thursday’s presentation to the whole group, councilmember Matt Flaherty characterized the new tax as being distributed to the jurisdictions based on population. The slide he used also indicated a population-based approach.

Asked later by The Square Beacon if that meant a decision had already been made between the two possibilities, Flaherty said his remarks and the slide were incorrect. It’s something he’ll clarify in future meetings, he said. Those include a meeting of the city council’s climate action and resilience committee next Wednesday, March 11 at 6:30 p.m. in the city council chambers.

Flaherty told The Square Beacon no decision has been made about which approach to use for LIT distribution—a property tax-based formula or a population-based formula. Flaherty added, “It’s something that needs to be explored and discussed, as there are likely pros and cons to both approaches. I have more to learn on this front, and I believe the city’s legal department, the controller’s office, and city bond counsel, as well as city council’s attorneys, will help to advise us on such a discussion.”

Finance and and economic equity table

After the four 20-minute breakout sessions, The Square Beacon asked Alex Crowley, Bloomington’s director of economic and sustainable development, if he was surprised by anything he heard from attendees who cycled through. Crowley said he was a little surprised that some people were pushing for an even higher tax increase—up to the maximum of about 1.3 points higher. About the push for the higher increase, Crowley said, “I guess it makes sense. Some people are like: Let’s go for it!”

Crowley said he liked the level of focus he heard on spending the money directly on those who most need help, with as few intermediaries as possible. Crowley contrasted that line of thinking with a theory that says: If you build up an economy with great opportunities, people can find ways to be a part that.

All four groups who cycled through Crowley’s table mostly echoed the sentiment that councilmember Matt Flaherty had expressed in the open pitch to the larger group: “[E]verybody pays the same percent. But of course we know that lower income folks have less disposable income and thus are more vulnerable to any tax. And for that reason it is the highest priority and absolutely essential that investments from this fund go to benefit lower income folks and vulnerable people in our community.”

More specific ideas floated at the table included weatherization and public transit.

Weatherization of buildings and homes was touted as a priority over solarization, because of the faster payback. That was a view supported even by a local solar installer who attended the meeting.

One woman who described herself as an “old liberal” said she thinks “every penny” of the additional 0.5 percent of tax should put put towards public transit, so that buses would run with a frequency of 12-15 minutes. The additional tax money should be used to make buses fare-free, she suggested.

A fare-free public transit proposal in Bloomington is somewhat complicated by the fact that Indiana University pays Bloomington Transit around $1 million a year so that university-affiliates have their fares covered, and can board just by showing an ID. If the system were fare-free, it’s not clear what leverage Bloomington Transit would have to negotiate with IU to continue the university’s annual contribution.

On Thursday, Crowley suggested that instead of making public buses fare-free, the focus could be on making the boarding of buses transaction-free for almost everyone, not just Indiana University affiliates. The fares of city residents could be covered through the new local income tax, Crowley said. And Bloomington residents could be issued a city ID card they could show bus drivers in order to board.

That approach looks like it could finesse the issue of the university’s $1 million contribution.

Early in the first round of the table sessions, a student who’s studying environmental management at Indiana University’s school of public policy first got confirmation that Crowley’s department is the one that is pushing for more parking garages. He told Crowley that building more parking garages is “totally antithetical to everything were doing here tonight.” The new local income tax money would be better spent on buying buses and things, he said.

Also discussed a bit was the idea of restricted or excluded uses of the new tax money. Some attendees thought it was important that the question of allowable uses be thought through. Should salaries be allowable expenditures of the new tax money? Should the new tax revenues be used only to make one-time capital grants?

In any event, it was important to those who cycled through Crowley’s table that the expenditures be accounted for in a way that would prevent the city from playing a “shell game” with the funds, by making an expenditure from the new tax money, and eliminating a corresponding expenditure that is currently made out of the general fund.

Crowley told The Square Beacon that details of the fund have not yet been worked out. Asked if it’s possible that the new tax money might go into a fund over which the city council has control—along the lines of the alternative transportation fund—Crowley said, “I think those decisions are ahead of us.”

Crowley said that the administration’s use of the word “fund” does not prejudge the question of whether the new tax money will go into a fund that is restricted.

Next steps

The city council’s climate action and resilience committee will meet next Wednesday, March 11 at 6:30 p.m. in the city council chambers.

Chair of the committee, Matt Flaherty told The Square Beacon that Wednesday’s meeting occasion will provide a chance for members of the public to address the whole assembly—from the public podium with timed speaking turns—in a way that was not possible last Thursday.

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