Statement on LIT Increase Proposal at Last Night’s City Council Meeting

The following is a statement I made at last night’s meeting of the Bloomington City Council in opposition to the proposed increase of the Local Income Tax (LIT):

Good Evening, Councilmembers,

Thank you for your diligent consideration of this important community issue. I particularly appreciate that many of you have actively reached out to county officials to hear our concerns and those of our residents.

I have made a number of public statements in opposition to moving forward on this particular tax proposal at this time, and I won’t repeat those here, except to say that I believe that there is a better way if we work together to support legislative changes that have already been under consideration at the state level. But I want to make two comments on aspects that I haven’t really yet talked about in public:

First, about transit: I myself became interested in a potential increase in local income taxes several years ago as a way to increase funding for transit across the county, in both rural and urban areas. I and many other transit advocates, including members of the local business community, even testified multiple times in front of the General Assembly in favor of increased opportunities to raise local revenue for transit. We see transit both as vital for social equity and vital for workforce development.

While we did not get the dedicated legislation we had hoped for, it later became clear that an increase in the ceiling for an existing economic development income tax, enabled by a recent major recodification of all local income tax legislation, could be used for transit as well. I still have hopes for this tax as a source of funds for transit.

Most advocates recognize, however, that now, while we are still in the midst of a pandemic, is not the right time to be raising taxes for transit. That while taxes are rarely popular, waiting to be clearly on the upside of the recession is a better time to be moving forward.

The administration, however, is racing to beat the clock, arguing that the General Assembly will change the income tax legislation in a way that is vastly less favorable to cities and to Bloomington in particular. And they may be right. But on one hand, they argue this is their only chance to raise taxes. However, at the same time the administration has explicitly removed transit from the proposal, with the idea that taxes can be raised again *later* for transit. If the General Assembly is already going to make it more difficult for cities to raise funds, do you think that passing a vastly unpopular tax increase will make the situation better? I would guess that it is more likely to make it worse. Put differently — either this is our only opportunity to raise taxes or it isn’t – if it isn’t, then why the rush?

I had hoped to avoid using this phrase, but I believe in this current proposal, transit has been thrown under the bus.

I know that this Council is very committed to transit. While I hope that you postpone this tax proposal and do not vote it forward tonight, I also very much hope that we can work together to come up with an effective method to fund the expansion of both of our transit systems.

My second comment is that although I think raising taxes in the midst of a pandemic is a bad idea in itself, I’m curious why a short-term General Obligation bond as an alternative has not been a serious topic of discussion, at least not in public as far as I can tell. Yes, some shuffling between budgets would have to be done so that only capital expenses would go into the bond, and capital expenses from other funds could be moved into the bond, freeing up operating revenue. But I could easily see a one or two-year GO bond to raise enough revenue to make the climate change investments that I believe many on this Council support.

The GO bond alternative would have the advantage that it would be the City Council alone making taxing decisions for City residents alone. Further, it has a built-in sunset – the City Council would have to decide to issue another set of bonds for future expenses. It would be a great opportunity to make a strong investment in climate change infrastructure that (a) would not force residents outside of the City to pay for a tax that they do not want and (b) it would allow the economy a chance to recover before building a community consensus on additional permanent taxes.

Essentially, in addition to allowing the City Council to make decisions for City Residents, using a GO bond would also move the funding burden from income to property taxes. I honestly don’t know if that would be fairer and less regressive. It isn’t a no-brainer either way. But I’m just expressing surprise that this option hasn’t been a bigger part of the discussion.

Thank you very much for your time tonight.