Indiana lawmakers want to repeal Indianapolis’ special downtown taxing district

In the waning hours of the 2023 legislative session, lawmakers inserted into the state budget the ability for Indianapolis to create a special taxing district to spruce up the downtown and address homelessness.

Now there’s an effort underway to take it back, even as the city has already set the district into motion, with the approval of a new tax at the City-County Council’s final meeting of 2023.

Republican Rep. Julie McGuire of Indianapolis filed House Bill 1199 to abolish the city’s “economic enhancement district,” with support from Rep. Jeff Thompson, R-Lizton, the House’s lead budget writer. McGuire and Thompson had voted for the state budget; neither could be reached for comment Tuesday.

The City-County Council approved the new tax by a party-line vote. The now-threatened tax would be a flat $250 annual fee for homeowners and about 0.17% of other property owners’ assessed value, amounting to about $5.5 million in the first year for cleaning up downtown and supporting a low-barrier homeless shelter, among other initiatives. Collections would begin in spring 2025.

The late state budget add last year came as a surprise some of the General Assembly, as the proposal was finalized during closed-door negotiations.

In the months since, an anonymous group of Mile Square business and property owners opposed to the taxing district has pledged to lobby lawmakers to change or get rid of it. Former House Speaker Brian Bosma has been a public spokesperson for the group, DefendDowntown.com, which says it is concerned about how the tax will affect the cost of living and working downtown. The website doesn’t list any names.

Bosma argued in an op-ed in the Indianapolis Business Journal that renters could bear the brunt of potential fee increases, which may force people to leave downtown. The ordinance states that any increases cannot exceed the inflationary adjustment as determined by the U.S. Bureau of Economic Analysis.

Bosma also criticizes the fact that city leaders created this district without a vote from property owners.

Five of the district board’s eight members will be property owners, however.

The concept of a tax for a central business district isn’t new. Large cities have been instituting and reauthorizing such downtown taxing districts for decades. Downtown Indy Inc. led an effort in 2018 to create a similar taxing district through a petition process but faced strong opposition from the Indiana Apartment Assocation, and the campaign couldn’t get at least 50% of property owners to sign.

Last year, as the country tried to bounce back from the pandemic, Downtown Indy received $3.7 million from the federal American Rescue Plan Act to pay for cleanliness, public safety and homelessness initiatives downtown. The goal behind the economic enhancement district was to create a sustainable funding source to continue this work.

“We have to ensure that downtown isn’t just looking and feeling its best around big events, but that we have the ability to offer tailored, property-specific service, 365 days a year,” CEO Taylor Schaffer said.

The Indy Chamber talked to lawmakers about the idea during the 2023 session, not realizing it would come to fruition so soon, said Taylor Hughes, vice president of policy and strategy.

Then the Chamber spent the remainder of the year meeting with property owners in Mile Square to gather input on how much the fees should be and what specific initiatives they should fund, he said.

“We have worked really hard to build a solution that people can feel good about and that we think will begin to solve some of these really big problems; that doesn’t mean it’s the perfect solution,” Hughes said. “There might be opportunities to refine it. But we do need something. So the idea that a bill would be introduced to repeal what has been a really robust conversation, I think is pretty concerning.”

Republican Sen. Kyle Walker of Lawrence, who played a key role in getting the initial language added to the budget, said he did not anticipate the starting point for this session’s negotiations to be a full repeal, and said he doesn’t support that. Rather, he would support discussing more guardrails.

Walker said he thinks the district will help with both real and “perceived” problems downtown.

“Downtown certainly can be safer and can feel safer,” he said. “I’m not suggesting there’s not necessary improvement for public safety downtown. But I also believe that part of downtown’s issue is more perception-based, and I think the EED can address both of those.”

Contact IndyStar state government and politics reporter Kayla Dwyer at kdwyer@indystar.com or follow her on Twitter @kayla_dwyer17.