Commentary

Eliminating economic enhancement district eliminates tool to improve downtown Indianapolis

January 22, 2024 7:00 am

Downtown Indianapolis skyline with blue sky. (Getty Images)

The House Ways and Means committee last week heard hours of testimony about eliminating a financing mechanism intended to pay for critical services in the Indianapolis Mile Square.

This area, which houses the seats of state and local governments, as well as marquee sporting and entertainment venues has seen better times. In 2023, Indianapolis was able to secure a provision in the state’s budget that would allow for Indianapolis to institute a fee on property owners in the heart of downtown, to pay for needed services.

Now that this fee has been locally approved, powerful interests at the Statehouse are pushing legislators to invalidate the financing tool.

The funding mechanism at risk, known as an Economic Enhancement District, would pay for public safety enhancements, increased cleaning, and services to reduce homelessness. The total budget for the Economic Enhancement District will be $5.5 million per year. 

First, let us look at the reality of downtown Indy.

A 2023 report indicated that Indianapolis had over 1,600 homeless individuals, with several hundred being unsheltered. While overall homelessness is down slightly in Indy, there has been a significant increase in unsheltered residents – particularly among Black individuals and families. Downtown Indy sees most of these unsheltered individuals, and the homeless service providers are located near the center of the city. These individuals require significant help as they move towards permanent and safe housing. After considerable discussion and study, the General Assembly and Indianapolis are investing a combined $32 million to build an emergency shelter downtown, with comprehensive services that is open 24/7 to serve these individuals and families as they work towards permanent housing.  

While empirically, crime is down in Mile Square and greater Indianapolis, perceptions from many vary. In fact, the General Assembly is currently looking to expand handgun carrying permissions for legislators and staff due to many of our state’s leaders feeling unsafe in our state Capitol complex and environs. 

EED districts elsewhere

The Economic Enhancement District legislation in the budget allowed Indianapolis to pass an ordinance to assess a fee (not to be confused with a property tax increase, which this is not) to pay for enhanced services to meet the needs of property owners. Homeowners will pay a flat $250 per year, with other property owners paying 0.168% of their property’s gross assessed value

There are over 2,000 of these types of districts within the United States, which started popping up in the 1970s. They go by different names but are sometimes referred to collectively as Business Improvement Districts (BIDs). While each BID operates slightly differently, they are all public-private partnerships created by a local ordinance and overseen by a board of directors. Administration is overseen by a nonprofit, in this case Downtown Indy, Inc. 

Since 1988, Indiana has had an enabling statute to create a BID (known in the original law as an Economic Improvement District), and many localities took the state up on the offer – Evansville, Fort Wayne, Northwest Indiana, and even Woodruff Place and Fletcher Place in Indianapolis have such districts. However, when Indianapolis began the process to create a downtown district in 2018, the General Assembly passed legislation to make it nearly impossible for local governments to obtain the large number of petitions that would be needed to create such a district. The Economic Enhancement District legislation passed last year made it easier for Indianapolis to create such a district. 

Opponents

The opponents who are driving this effort  to repeal the Economic Enhancement District state that Indianapolis can either raise general taxes to pay for these services, or should depend on philanthropy for the funds. Not so – it is not realistic to depend on philanthropy to provide long-term operational support for these types of activities. Raising taxes might push Indianapolis towards debt caps that would limit bonding or borrowing. The district, and others like it, provides a unique and straightforward economic and community development tool for municipalities, developers, and property owners because it allows targeted control, financing, and development of projects without creating an additional financing burden on the City.

Opponents, which include some apartment owners and out-of-state interest groups, concede that downtown Indy needs assistance, but posit no realistic funding alternative. 

Proponents include area residents, developers, apartment owners, employers, and community leaders. It is important to note that the conversation around the need for the Economic Enhancement District has been going on for over a decade, and is a solution to drive sustainable, dedicated resources toward issues of public safety, homelessness, and cleanliness in the heart of the capital city. The conversation ramped up, as the pandemic increased the urgency around this need, but this is certainly not a new policy discussion. 

While the enabling provision was indeed placed in the state budget and was not heard as a standalone bill in 2023, this is not that unusual in Indiana (and was not the only “surprise” provision included in the 2023 budget – can we talk about pay increases for state elected officials?). Using this as a reason to repeal this tool is disingenuous. 

This tool to create an Economic Enhancement District was provided by the Indiana General Assembly to the City of Indianapolis. This tool is one that businesses and residents can be engaged with to drive their own destiny. 

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Stephanie Wells
Stephanie Wells

Stephanie Wells is President of the Indiana Fiscal Policy Institute. She is the Founder of Wells Strategy + Solutions, which provides clients with assistance on workforce development, economic development, policy solutions, research, and data analysis, along with logic and data modeling. Previously she was Vice President of Workforce Development for the Indiana Manufacturers Association.

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