Economic Improvement Districts

Economic Improvement Districts (EIDS)

Economic Improvement Districts, also known as business improvement districts (EIDs), are public-private partnerships in which local property and business owners elect to make a collective contribution to the maintenance, development and promotion of their property.

EIDs are widespread throughout the United States, with approximately 430 nationally, and provide a unique and straightforward economic and community development tool for municipalities, developers and property owners because they allow targeted control, financing and development of projects without creating an additional financing burden on county and municipal taxing units. EIDs also allow tax units to leverage the cost of public improvements and services that would otherwise be limited by the circuit breaker credit.

EIDs are created by property owners who want to self-fund and control the development of projects serving and surrounding their property, e.g., replacement of sidewalks, revitalizing neighborhoods, promoting and marketing of businesses, building public infrastructure. Property owners establish an EID by petitioning their taxing unit’s legislative body for approval of an EID.

EIDs were recently strengthened as an economic development tool for tax units, tax payers and those involved with economic development, including:

  • Expansion of Use of EIDs for Economic Development. EID projects are now included within the definition of an “economic development facilities” that fall under the economic development jurisdiction of a county or municipal Economic Development Commission (amended Indiana Code 36-7-11.9-3). This allows an Economic Development Commission to provide economic development incentives and issue tax-exempt bonds for projects located within an EID.
  • Expanded Project Scope. The scope of an EID project has been clarified and expanded to include public improvements, infrastructure, utility facilities improvements and equipment, water facility improvements and equipment, streets, sidewalks and improvements related to the habitability of residential property (amended Indiana Code 36-7-22-3). This language clarifies that EID projects include public improvements made to local economic and residential development projects.
  • Taxpayer and Tax Unit Incentives to Use EIDs. EID assessments paid by property owners within an EID are explicitly included within the definition of Indiana property tax for the purpose of being deducted against the EID property owner’s federal income tax. However, while an EID assessment is considered a property tax, it is not to be calculated as part of the circuit breaker credit that limits the amount of property tax levy a tax unit can generate (amended Indiana Code 36-7-22-12). The result of this amendment will provide EID property owners an incentive to support EID project while not posing a disincentive to local tax units that may be financially impacted by the new circuit breaker caps/credits that are being imposed on them (it actually results in an incentive for tax units to create EIDs to shift the cost of economic development projects, improvements and services to the EID).
  • Authority to Finance Projects with Bonds. EID Boards have the same powers and bond issuance authority of an Economic Development Commission (new Indiana Code 36-7-22-22). This clarifies and substantially expands the authority of an EID Board and its ability to secure tax-exempt bond financing for EID projects.

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