Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Municipal Finance topic
No spam. Unsubscribe anytime.
Controller: SB 1 will shrink assessed value and likely reduce municipal revenues; LIT cap and bond limits create uncertainty
Summary
Bloomington’s controller told the Common Council that Indiana Senate Bill 1 will cut assessed property values by roughly $1.5 billion and rework local income tax (LIT) formulas — including a municipal cap of 1.2% — creating near-term uncertainty for the 2026 budget and reduced LIT receipts by 2028.
Controller McClellan told the Bloomington Common Council on April 30 that Indiana’s recently passed Senate Bill 1 (SB 1) will reduce the city’s taxable assessed value by roughly $1.5 billion from a base the controller described as about $5.5 billion, and will change how local income tax (LIT) revenues are calculated and distributed.
That combination, McClellan said, means property-tax-derived revenue for Bloomington will decline in the short term and municipal LIT receipts are likely to fall starting in 2028. “What we are predicting is that in 2028… we won’t be able to raise as much LIT revenue as we normally receive,” McClellan said, adding that the municipal LIT cap under SB 1 is 1.2 percent — and that officials do not yet know the precise taxable base the state will apply to calculate it.
Why it matters: Bloomington relies heavily on property tax and LIT revenue for the general fund. A reduction in assessed value tends to push property tax rates higher while still yielding less total revenue to the municipality; parallel changes to LIT calculation and distribution amplify budget uncertainty going into the 2026 planning cycle.
Key details McClellan provided: - Preliminary analysis estimates the assessed value decline at about $1.5 billion from an assessed base she cited as $5.5 billion; city staff emphasized a parcel-by-parcel analysis is underway and a full estimate will be delivered before the next budget season. - SB 1 moves municipal LIT calculation from the old countywide base to a city municipal adjusted gross income base and imposes a municipal LIT cap of 1.2 percent; McClellan said the practical revenue implications are unknown until the state (or DLGF) issues calculation rules. - Changes to LIT take effect on a later schedule (discussed as 2027 with revenue effects reflected in 2028), while SB 1’s property-tax deduction/credit changes affect 2026 revenue expectations. - Bonding rules were narrowed: McClellan read language that new general obligation (GO) bonds issued after 05/01/2025 for short-term debt (under five years) are subject to a one-year “cool off” period; certain two-year-or-less GO bonds already outstanding were described as retroactively subject to that restriction.
Council reaction and next steps: Council members asked clarifying questions about the GO bond “cool off” definition and how the 1.2 percent municipal LIT cap will be calculated in practice. McClellan stressed uncertainty over administrative calculation rules and said the city’s financial analyst and controller’s office are completing parcel-by-parcel work to provide a clearer estimate ahead of the May 14 joint deliberation session with the administration.
What the controller did not say: McClellan provided a preliminary estimate and described likely directions of change but did not provide a final revenue loss number for the city budget; the city warned that full impacts depend on state rulemaking and parcel-level assessment outcomes.
What happens next: City staff pledged to return with a full estimate before budget hearings begin and to work with the council as the administration develops a formal 2026 proposal. The council is using those findings to rework a priorities letter it plans to send the mayor’s office ahead of formal budget negotiations.
