After legislative changes earlier this year, what’s next for Indy’s downtown tax district?

Although Majority Republicans in the Indiana Legislature didn’t kill a taxing district meant to help the city of Indianapolis and the not-for-profit Downtown Indy Inc. enhance public safety, beautification and homeless services downtown, the changes they made to the law that authorized it have sent local architects of the district back to the drawing board.

The economic enhancement district would fund the operating costs of a low-barrier homeless shelter, along with cleanliness, beautification and homelessness outreach efforts in downtown Indianapolis. After legislative changes that drastically reduced the number of property owners who would pay into the fund, leaders from the Indy Chamber and Downtown Indy Inc. are working to find a new financing model that maintains the services but doesn’t overburden remaining mandatory payers.

Under the new law, owners of apartments and single-family homes are exempted from the tax unless they decide to opt in to paying the tax, leaving potential for a large decrease in available funds.

Before the changes, the proposal from the Indy Chamber and Downtown Indy Inc. included all property types with no exemptions. The Democrat-led Indianapolis City-County Council voted to approve that version of the framework mostly along party lines in December.

A budget presented to downtown stakeholders, media and the Indianapolis City-County Council then set the total revenue for the district at $5.5 million a year, of which $1.87 million was slated to come from apartment owners and $160,000 from owners of single-family homes. With the changes, commercial property owners (other than apartment owners) will likely pay most of the cost of the district. Downtown Indy Inc. would manage the district’s budget.

Taylor Hughes, vice president of policy and strategy for the Indy Chamber, said there are essentially three top priorities for the reworked plan: maintaining the same fee for required payers (rather than increasing it to make up the lost revenue sources), ensuring the level of services downtown are highly impactful and sufficiently funded and creating a designated area over which the services are applied is feasible.

Hughes said the chamber will try to come as close to the original $5.5 million revenue target without sacrificing those goals.

He said the new law did not send the process “back to square one.” In many ways, the legislation codified into state law a lot of the plans Hughes and Downtown Indy Inc. CEO Taylor Schaffer had laid out last year. For example, the law made the $5.5 million planned budget into a budget cap and specified that the fee paid by property owners would be based on assessed value.

“We’re fundamentally working with the consensus that a lot of property owners came to in terms of how the district is funded,” Hughes told IBJ. “So the work that was done last year has definitely helped us get to this point.”

Owners of apartments and single-family homes still have the option to opt-in to the fee. Because of the uncertainty about how much of that funding is guaranteed, though, Hughes said the district’s budget will likely be crafted based only on projections for mandatory payers. Revenue from any non-mandatory payers would just be “cherries on top” of the budget, he said.

There is urgency to the work.

By the end of June, Downtown Indy Inc. will have run out of a $3.5 million infusion of federal COVID-19 relief funds, according to Schaffer. Funding for additional homelessness outreach in collaboration with Horizon House has been extended through the end of the year, but the bulk of the not-for-profit’s COVID funding will be gone soon with a substantial time gap before the tax district revenue could kick in.

Schaffer said the city has made it clear that downtown won’t go without funding, though it’s not certain yet what form that city funding will take.

Even with the legislative changes and the Indianapolis City-County Council need to reapprove the economic enhancement district, the revenue should start flowing at the same as the city originally expected. The earliest the new fee could be added to tax bills is April 2025, with the revenue flowing after that.

But there is a deadline for action: The state law sunsets after December 31. And because the legislation nullified the previous City-County Council action, the legislative body will have to approve another plan by the end of the year. As part of that process, the council will send a notice to all property owners within the district within 60 days of a public meeting in advance of the vote.

For now, the work for Schaffer and Hughes is focused on building a consensus among downtown stakeholders and answering the funding question.

“We want to create, you know, more resources to invest in downtown because we think that’s really critical for the city, and the region, and the state’s success,” Hughes said. “And our commitment is to doing that in partnership with property owners and building consensus on the front end. So that’s what you’ll probably see from us this year, and what we will be committed to in putting together that final proposal.”