There’s a lot of buzz surrounding Senate Bill 361 during this year’s Indiana General Assembly. And rightfully so.
Part of the bill allows for the creation of innovation development districts (IDDs) around the state, and that is drawing a lot of attention and stirring some debate. In addition to establishing a lucrative incentive for film, television, music and digital productions, a newly added part of the bill paves the way for Indiana communities to use incentives to go after out-of-state talent and recent Indiana college graduates – including remote workers – many of whom could be in the tech sector.
Ohio and North Carolina have already used similar concepts to IDDs to draw huge tech developments to their states, and Indiana is hoping to do likewise.
Similar to a local tax increment financing (TIF) district, an IDD would capture (state) income taxes, sales tax and incremental property taxes generated by the district that go above the base rates.
In the case of the IDD, a state fund created from the captured taxes would be managed by the Indiana Economic Development Corporation (IEDC). The fund could be used to acquire land and make infrastructure improvements in the district.
Early on, there was concern by some lawmakers that with IDDs, IEDC officials could take a sizable chunk of the captured taxes from a project in one region and deploy that money in another part of the state.
IEDC officials emphasize that cooperation with local municipalities is critical to make these developments work and insist state officials have no intention to overreach or subvert local units of government with the proposal.
There remain some moving parts with the bill, which is likely to go to conference committee to address provisions pertaining to the IDDs. The tax revenue grab has become less of a hot topic after a recent committee amendment that exempts local income taxes from being captured.
Unmistakably, IDDs are designed to draw huge cutting-edge projects to the Hoosier state. They are formed through a partnership between the IEDC and local units of government where the district is located.
Secretary of Commerce Brad Chambers and IEDC officials say the IDDs are one way to create flexibility and allow state and local officials to move rapidly to score high-profile, high-tech projects.
There’s good reason to think the IDDs could attract some blockbuster development deals and blue-chip tech and tech-enabled companies to Indiana. They could also draw such developments as utility-level wind and solar farms.
North Carolina created “megasites,” which operate similarly to the proposed IDDs in Indiana. With that arrow in its quiver, the Tarheel state recently landed the $1.3 billion Toyota battery plant for its Greensboro-Randolph megasite.
Ohio used its Port Authority program – which allows the state to assemble land needed for projects and work with the local community to contribute state and local dollars – to offer chipmaker Intel Corp. $2.1 billion in incentives to build two factories in the Buckeye state.
The Indiana Chamber fully supports SB 361 because it modernizes the state’s economic development tools and allows the IEDC greater flexibility in using its various appropriations.
“It arms the IEDC with one of the most flexible and impactful economic development tools we’ve seen in some time and will really allow us to capitalize on those significant opportunities,” Mark Wasky, IEDC senior vice president of community affairs, told lawmakers during a recent senate committee hearing.
Senate Bill 361 also added in language from another bill — SB 4, which is now dead — to create local workforce recruitment and retention funds, money culled from public and private sources to attract educated, out-of-state workers with very few state mandates attached.
Communities can use the money for promotional advertising or to offer residency incentives to “qualified workers” – anything from grants and loans to co-working space memberships. A five-member panel of local workforce fund managers would decide how to grant incentives.
Freeing up resources for communities wanting to retain or recruit new residents is important for several reasons. Indiana’s labor force is expected to decline over the next two decades, while the U.S. labor force increases. Also, over the next 30 years, Indiana’s population is expected to increase but at rates that are among the slowest in our state’s history.
“While many Indiana metro areas continue to grow, large swaths of the state — including most mid-sized and rural communities — saw a population decline between 2010 and 2020,” states Matthew Kinghorn, senior demographic analyst at Indiana University’s Business Research Center.
The number of remote workers has skyrocketed from five million to more than 60 million since the pandemic erupted in March of 2020. As the pandemic subsides, more than 40 million of these workers are expected to continue working remotely. Indiana communities can recruit these individuals to live in and contribute to their regions.
The investment to attract these workers can be mathematically justified. For instance, in Muncie, a (remote) worker with a household income of $138,000 will contribute on average $415,000 of new economic impact in spending – and $55,000 in tax revenue – over five years.
And the state doesn’t have to wonder if these worker attraction models will work. Pilot projects to attract remote workers launched last year in Bloomington, West Lafayette, Greensburg and Southwest Indiana have drawn 30 – and counting – high-earning remote workers. Many are in the tech sector.
Last year, the General Assembly made it a legislative priority to appropriate $500 million to the READI program – for regions around the state to finance quality of place programs and projects.
The language folded into SB 361 from SB 4 facilitates the next step: Giving our communities the resources to attract the talent who will realize these improvements and leave a lasting economic impact.
The Indiana Chamber is actively involved in the process for SB 361 and will continue to push for the measure to remain as robust as possible as the legislative session draws to a close.
