COMMENTARY: Stating your case to the state to control some local issues

The state government also sets parameters for selected local actions by Hoosier communities.

Under that structure, the Indiana General Assembly on Monday granted Vigo County permission to enact a 1-percent tax on food and beverages. A coalition of Terre Haute and Vigo public and business officials support the tax to fund the construction and maintenance of a new downtown convention center and attended the Legislature’s special session Monday in Indianapolis. The tax would generate between $1.2 million and $2.1 million a year, and its backers expect the center to increase economic activity in the heart of Terre Haute. 

With the renovation of Indiana State University’s Hulman Center, a $50-million project, a convention center could indeed revitalize the downtown district and turn it into a destination for residents and visitors. The two projects were originally linked, but separated last year after ISU chose to renovate Hulman Center on its own, concerned that a $37.5-million allotment from the state in 2015 could be lost if the community couldn’t soon raise an equal $37.5 million in local matching funds.

The city, county and Terre Haute Convention and Visitors Bureau had committed a combined $25 million toward the Hulman Center and convention center project. A 1-percent food and beverage tax would’ve closed that funding gap last year, but legislators turned down that proposal last year.

The county’s Capital Improvement Board continued working separately from ISU to build a downtown convention center. Vigo’s food and beverage tax proposal went before the Legislature this year again. This time, in a one-day special session Monday, lawmakers agreed to let the county pursue that tax.

The lawmakers’ approval doesn’t finalize the local tax. Instead, the Legislature’s action simply gives Vigo County the green light to seek the tax through the local process. The County Council would have to approve it. County commissioners intend to conduct public meetings to explain the tax on food and beverages.

Other communities sought the General Assembly’s permission for food and beverage taxes this spring. Only Vigo received an OK.

If a tax is implemented in one county or city, and if local elected officials must vote to accept or reject it, and if it directly funds local entities, why must the state first say yes or no?

State Sen. Jon Ford, the Terre Haute Republican who guided the bill toward passage, said he and many Indiana Senate members would prefer to leave such decisions to local officials alone. “But for some reason, [proposals for a local food and beverage tax] and the innkeepers tax have to go through the Legislature.”

Ford added, “It’s been that way forever, I guess.”

Pretty close.

Indiana adopted the Home Rule Act in 1980, giving cities, towns and counties significant leeway to handle their affairs and needs, said Joshua Claybourn, an Evansville attorney who counsels clients on business law, government services and public finance. Still, the Home Rule Act specifically withholds certain powers, including the imposition of a tax, unless it is granted by state law, Claybourn explained.

“Prior to the Home Rule Act in 1980, things were actually much worse from the standpoint of local government,” Claybourn stated. Under the old “Dillon’s Rule,” any powers for a municipality or county had to be explicitly authorized by state statute.

Even with the Home Rule Act, the Indiana General Assembly has in recent years prevented localities from imposing environmental ordinances (such as bans on plastic shopping bags), annexing portions of their home county or regulating short-term rental platforms, such as Airbnb. Regardless of whether local residents oppose or favor such steps, shouldn’t those citizens and their elected officeholders make such decisions?

There’s also the irony that many Republicans who dominate the Indiana Legislature routinely blame the federal government for overreaching into state issues. 

“When members of the Indiana General Assembly complain about ‘mandates’ from Washington, I always think how ironic it is that they see no incompatibility between their objection to Washington’s directives and their own tight leash on decisions that should properly be made by local government officials,” said Sheila Suess Kennedy, professor of law and public policy at IUPUI School of Public and Environmental Affairs. “Is it really any business of the state whether a city outlaws plastic bags or allows residents to rent rooms through Airbnb?”

Like Ford, Terre Haute Mayor Duke Bennett would prefer municipalities and counties to have the ability to pursue a food and beverage tax on their own. But if prior state legislative approval continues to be the law, Bennett is glad the state sets uniform parameters for each community seeking an OK to pursue such a tax. Under the existing format, the 1-percent tax on prepared and served food and beverages — if the Vigo County Council votes to enact it — must be used for the convention center’s construction, improvements, maintenance or financing.

“That’s why we got it,” Bennett said Wednesday of the Legislature’s approval. “They said, ‘They’re not using it to build their local funds. They’re using it to build tourism.’”

Other communities seeking food and beverage tax approvals also didn’t have as much support from local entities and officials as Vigo County, Ford said.

Ford reemphasized that Tuesday’s General Assembly action only authorizes Vigo’s pursuit of the tax. Its enactment is up to the county. Such votes often take time. Monroe County, home of Bloomington, got legislative approval for a food and beverage tax in 2009, but the tax didn’t pass the local county council until last December. Now it’s Vigo County’s turn.

“The County Council and commissioners are going to have to make their case to the residents, as to why this is a good proposal,” Ford said Wednesday. “They’ve stated their case to the state Legislature. Now they have to state their case to Vigo County residents.”