Council votes to approve creation of downtown enhancement tax

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Supporters of the proposal up for vote Monday night want a new funding stream for Downtown Indy Inc.’s cleanliness, safety and homeless-outreach efforts that began last year. (IBJ photos/Eric Learned)

A new fee on downtown property owners that is aimed at increasing public safety and cleanliness in the heart of the city while reducing homelessness was approved Monday night by the Indianapolis City-County Council.

The 19-5 vote, which followed party lines, creates an economic enhancement district—or EED—bound by North, East, South and West streets—the Mile Square—that would see increases to property taxes within those boundaries.

All five Republicans on the council voted against the fee: Paul Annee, Josh Bain, Mike Dilk, Michael Paul Hart and Brian Mowery.

Under the proposal, single-family homeowners would pay an annual $250 flat fee starting in 2025. Based on a formula in the ordinance, owners of commercial properties are expected to pay nearly 0.17% of their properties’ gross assessed value, or about $1,681 per $1 million in gross assessed value.

The measure is expected to generate $5.5 million a year and continue Downtown Indy Inc. enhancement efforts begun a year ago with $3.5 million in federal COVID-19 relief money.

The vote sends the ordinance to the desk of Mayor Joe Hogsett, who has said through a spokesperson that he plans to sign it into law. That would set the stage for the eventual enactment of the tax—as well as uncertainty as to whether it could survive a new push by opponents during the next state legislative session.

The Hogsett administration has been working for a year with Downtown Indy, the Indy Chamber, the Central Indiana Corporate Partnership and the City-County Council to create a sustainable revenue source for improvements to downtown, including the operation of a planned low-barrier homeless shelter just east of Interstate 65/70.

Monday night’s vote means the city and state must create a governing board to oversee the new district, which is designed to have four members appointed by Statehouse leaders (who are Republicans) and an equal number appointed by city leaders (who are Democrats). That board would ultimately decide whether to impose the tax on Mile Square property owners.

While it’s not clear who state and local leaders plan to choose for the board, a majority of the members must be downtown property owners. The group’s meetings must also be open to the public, with annual budgets submitted to the City-County Council for review.

“We’ll be working with all those who are making appointments on this board, including the governor, the mayor, the Indiana General Assembly, and the council, to advocate on what a diverse representative property owners and majority board looks like,”  said Taylor Hughes, vice president of policy and strategy for Indy Chamber. “We want a group that can speak to the various issues that we’ve heard from property owners over the last six months here … who are going to be able to speak to those on behalf of their property owner peers.”

Hughes said the Chamber and Downtown Indy Inc., which have spearheaded the effort to create the EED, would prefer six board members to be downtown property owners.

But there remain concerns among some supporters of the ordinance that even if the board were to authorize the tax, the state law supporting it could be reversed during the next General Assembly. That’s in large part because the Indiana Apartment Association, which has vigorously opposed such fees, seems keen on dismantling the mechanism.

Apartment owners as a group would be hardest hit by the new tax, contributing an estimated $1.87 million of the $5.5 million expected to be generated annually. The association represents 280,000 rental units throughout the state, including 5,000 in the Mile Square, according to spokesman Charlie Tinkle.

Apartment Association President Lynne Petersen told IBJ in written remarks last week that the fee would “only exacerbate the problem” of reduced occupancy rates in commercial and residential buildings by increasing costs.

IBJ reported earlier this year that despite a temporary rise in vacancy rates at the height of the pandemic, the apartment sector rebounded to 94.7% occupancy in 2022—the best since at least 2018, according to the Indianapolis office of Chicago-based brokerage Cushman & Wakefield.

While neither Petersen nor others with the apartment association would directly say whether the association will try to undo the tax, she said that “everyone should expect this issue to be revisited during the 2024 legislative session.”

Attorney and former House speaker Brian Bosma, who is serving as a spokesman for a group of property, business and apartment owners opposed to the tax, noted in an opinion piece submitted to IBJ that the “ultimate decision on whether to implement the tax rests with the Legislature.”

A new organization group called DefendDowntown.com  launched in October to push back against the tax. The site does not identify by name those behind the site but says it represents commercial business and restaurant owners, apartment owners, building owners and homeowners who “are deeply concerned with the implementation of a new unlimited special taxing district and how that will impact our costs and ability to live and operate downtown.”

Neither apartment association representatives nor Bosma were present at Monday’s meeting, which did not include a public hearing for the economic enhancement district.

Hughes said the Indy Chamber expects the Indiana Apartment Association to bring the matter to the General Assembly, but hopes to work with the organization in the coming months to find more common ground.

“We’ve definitely reached out to speak with them about what concerns they would like to see addressed,” He said. “We want to minimally increase the cost of doing business downtown while at the same time maximally increasing the quality of the market … That’s a benefit to everybody.”

While the city ordinance itself does not spell out how the tax money might be spent, the law approved at the 11th hour of the most recent Indiana legislative session—which gave the City-County Council the authority to create the taxing district—provides some guidelines.

The state law says the tax can be used for cleanliness and beautification efforts, operational costs for the low-barrier homeless shelter, homelessness outreach and the hiring of “safety ambassadors.”

Safety ambassadors would be tasked with deterring “aggressive panhandling and other nuisance behavior,” communicating with police about ongoing problems and providing “safety escort services,” among other responsibilities, according to the law.

The law also specifically calls on Downtown Indy Inc., a not-for-profit tasked with enhancing and advancing the city’s core, to provide support services to the enhancement district board. The board could hire not-for-profits such as Downtown Indy or private entities to carry out its enhancement efforts, or it could make arrangements with other governmental entities.

The existing pot of money for Downtown Indy Inc. runs out in June, but supporters of the new tax proposal say they hope donations and stretching existing funds can allow for a continuation of additional police bike patrols, increased frequency in cleaning schedules, and increased homeless-outreach efforts until the ordinance kicks in.

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8 thoughts on “Council votes to approve creation of downtown enhancement tax

  1. Tax the residents to perform a duty that should be covered by the taxes they already pay. Thank the headline writer for calling it what it is; not a few but a tax. A fee is a charge for something you choose to participate in. A tax you have no choice.

    1. Downtown property owners have been begging for these perks. And that’s fine, but why should my tax dollars go to special services for Downtown property owners that my neighborhood doesn’t receive? If you want extra services, you pay extra for it. It’s as simple as that.

  2. Why is this burden placed on property owners, especially residents? This is ridiculous. Where did the $3.5 million dollars go that was from the CV-19 relief fund? I will wait. Also, think about it…the public was told when gambling was legalized in Indiana that those funds would be used to improve roads, infrastructure, parks, common public areas, etc. What happened to that promise? The answer is always stick it to the consumer and raise or invent another tax. Pathetic.

    1. “Where did the $3.5 million dollars go that was from the CV-19 relief fund? I will wait.”

      You shouldn’t wait. You should read.

      The city quite clearly stated that this tax is meant to continue the work done with the COVID money running out.

      “What happened to that promise? The answer is always stick it to the consumer and raise or invent another tax.”

      Indiana has been cutting taxes for 20 years. Spare me this “taxes are always going up” nonsense.

      The problem is not that we are overtaxed. The problem is we don’t spend enough. Everyone wants someone else to pay and no one wants to pay taxes themselves.

  3. “Under the proposal, single-family homeowners would pay an annual $250 flat fee starting in 2025”. Are there still single family houses inside the mile square?

    1. Me and my wife just talked about it. There might be about 20 houses/town homes at Vermont and East street. Nothing else.

    2. Do condos count? Technically they’re “single-family/owner-occupied” but not detached units. I’m not sure under what definition that would fall under. If so, then there are a few other complexes that would go towards that count.

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