Looking for ways to constrain a state-created tax break for a local hotel project, the Bloomington City Council has delayed its vote on an enterprise zone investment deduction for the Springhill Suites project on College Avenue.
A vote has been moved to May 8 because council members were concerned Wednesday that the state’s enterprise zone investment deduction — a 10 year, 100 percent deduction on a company’s property taxes based on the property’s assessed value after improvements — would cost the city’s downtown tax increment financing district millions of dollars in new money it would have collected over the 10-year life of the deduction.
Unlike with a tax abatement, which the council grants as a project is coming through its chambers, the city’s legislative body remains unsure to what extent it can create criteria for approving or rejecting this deduction. And while a tax abatement can be set by the council for a certain number of years and on a sliding scale that reduces annually the abatement amount to zero, this request is a flat tax break that could save Urban Hospitality 1 LLC, the hotel’s developer, about $250,000 a year on the condition that money will be reinvested into the business.
The only reason the council has a vote on this deduction is because the project is in the city’s downtown TIF. For a local business outside of the TIF, the lone requirement is that the business lies in an enterprise zone, according to Monroe County Auditor Steve Saulter. A percentage of the property tax savings — in this case, about $100,000 a year — still have to be paid to Bloomington’s Urban Enterprise Association and its redevelopment commission.
The enterprise zone investment deduction was created by state statute in 2005 and went into affect in 2006, but it has not readily found its way through council chambers until now. Council member Marty Spechler said Wednesday he was for the deduction, describing the council’s vote as “pro forma,” or a matter of process. His colleagues, however, have lamented the deduction’s price tag: a vote for the tax break would take more than $300,000 in potential revenue from the TIF per year, or about $3 million over a 10-year period.
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