Deregulate Local Government for Economic Growth:  Streamlining Local Option Income Taxes and Other Reforms Can Unleash Indiana’s Cities and Towns

Deregulate Local Government for Economic Growth: Streamlining Local Option Income Taxes and Other Reforms Can Unleash Indiana’s Cities and Towns

Chris Cotterill: Cities and towns should have flexibility to promote economic growth.

Chris Cotterill: Cities and towns should have flexibility to promote economic growth.

Indiana’s leaders have worked diligently over the past ten years to improve the climate for business.  Taxes have been capped, cut, and eliminated.  Out of date laws have been repealed or reformed, and new regulations have been stopped.  This pruning, along with smart investments and other reforms, has yielded tremendous results.

As part that effort to make Indiana the best sandbox for business, our cities and towns must thrive.  That’s not a platitude, it’s a key part of our State’s economic development strategy. Like businesses, local governments are regulated in Indiana by state government.  There are reasons for many of the limits on local government, but the regulatory framework for local government also needs pruning.

We can take steps to unleash cities and towns from unnecessary, outdated, and unduly burdensome formalities to give cities and towns more flexibility to do what they need to do to attract talent and improve quality of place, which leads to more economic growth.

Let’s start in these areas:

  • Local Option Income Tax (LOIT): Let’s put aside calls to increase taxing authority and create a new streamlined approach to income taxes with fewer restrictions on how the money is utilized by local government. Those taxes include: CAGIT (1973), COIT (1984), CEDIT (1987), CEDIT for Homestead Credits (2002), LOIT for Property Tax Relief (2008), LOIT for Public Safety, and LOIT for Property Tax Replacement (2008).
  • Other Sources: Other funds such as Motor Vehicle Highway, Local Road & Street, and Parking Meters could have fewer restrictions on their use. Local units should be able to consolidate taxing districts that have identical boundaries and governance to simplify administration without losing revenue.
  • Public Notice Requirements: There are many varying public notice requirements throughout state law.  We need to do away with those and have a web portal on IN.gov where all public notices must be posted, along with updates via Twitter and RSS.  Individuals should be able to sign up to receive email and text alerts for notices of interest to them.
  • Competitive Bidding: An effort should be undertaken to review state laws relating to bidding and to simplify them on the concept that competitive bidding is sufficient (along with public notice as proposed above).
  • Buying & Selling Property: Like the bidding requirements, laws relating to purchase and distribution of real and personal property need to be simplified.  When property is purchased or transferred by a vote of a local council or redevelopment commission, that decision made during a public hearing should be sufficient.  Larger transactions, such as a sale of a municipal utility, should also have a more simplified process.
  • DLGF-Reforms: The requirements of the Department of Local Government Finance (DLGF) with the least substantive value should be identified collaboratively with DLGF and reformed–particularly in the areas of DLGF’s role in verifying compliance with advertising and public hearing requirements, reviewing additional appropriations, and public budget reviews.
  • Standardization of Powers:  A variety of laws, like IC 36-7-26 on Economic Development Project Districts or IC 36-7-29 on Environmental Response Financing, appear generally applicable to municipalities, but are actually narrowly tailored to apply to one or only a handful. These statutes could be reformed by tying them to Indiana’s system of classes of cities so that the tools provided by such statutes could be utilized by more cities and towns within the context of their particular governance model.

I expect cities and towns will have to do the hard work to propose specific reforms in the areas they collectively think are the most unnecessarily burdensome to the effective administration of their duties. Chiefs of staff, deputy mayors, controllers, clerks, and town managers should meet in a coordinated series of working groups to collaborate and develop ideas that will be shaped into legislative proposals.

That will take time and effort, but that investment should be well received by a General Assembly that has demonstrated it will deregulate wherever appropriate to enhance economic growth.

This post also appears in the Indiana Forefront blog sponsored by the Indianapolis Business Journal.

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