Indiana Launches Regional Development Effort

Published August 1, 2005

Indiana has created a Regional Development Authority for the northwest corner of the state, allowing local officials to raise taxes for redevelopment of the Lake Michigan shoreline and for transportation projects, including bus and rail lines and expansion of Gary Airport.

Since announcement of the plan, taxes in one of the counties went up, on July 1. Hoosiers on both sides of the issue have reacted strongly, many raising concerns about the plan’s likely effectiveness. Those outside of the state and local governments have been especially skeptical. (See sidebar.)

The plan received support from virtually all area lawmakers, Democrats and Republicans alike, though some grassroots Republicans criticize the spending and tax hike authority. The bill passed April 29, near the close of the legislative session. A seven-member RDA board is slated to be seated in September.

Lawmakers say the RDA provides a way to rejuvenate an area that has lost thousands of jobs in steel and related industries. The Lake Michigan shoreline of Lake County once was a center of America’s steel industry. Southern Lake and neighboring Porter County are more rural.

One County Controls Board

The mayors of Gary, East Chicago, and Hammond will each appoint a member to the RDA board. Mayor Tom McDermott of Hammond has announced he intends to appoint himself.

The Lake County Council also gets an appointment, giving Lake County four of the seven RDA votes. The RDA board will decide which projects to pursue and how to fund them. It also will have the power to condemn private property, borrow money, and build.

“Rural people have a concern over what’s in it for them,” said State Sen. Vic Heinold of Kouts, Indiana, in Porter County, but he said he supported the bill because of its potential to improve the area economy.

“Two primary projects are the Gary Airport expansion and rail from southern Porter and Lake Counties to Chicago,” Heinold said. “We are so tied to Chicago. A lot of people from here work in Chicago. To keep growing our community, there is a large need for people to move here and go to Chicago” for work.

“Progressive Action Needed”

Indiana House Speaker Brian Bosma said, “We have to take progressive action to ensure a vital future. One of the key elements of the plan is expansion of Gary Airport.”

Bosma said the airport can receive federal matching grants “that will jump-start development of the entire area. Ground transportation is also critical for future growth. People are going to need to get from municipality to municipality and through to Chicago in a convenient and timely fashion. Whether that’s done by bus or rail will be up to local decision makers.”

Taxes Already Rising

The RDA could spend $30 million annually on economic development projects in Lake and Porter Counties. Indiana has committed to give $5 million to the RDA in 2006 and 2007, though contributions could exceed that amount. Lake and Porter Counties and Gary, Hammond, and East Chicago each will contribute $3.5 million and have authority to raise taxes to provide the money.

Soon after the legislation became law, a local tax hike to fund the RDA was approved.

On a 4-3 vote in May, Porter County doubled a local income tax to 0.5 percent. That tax increase, which took effect July 1, is estimated to raise $7 million to be split between the RDA and property tax relief.

“Diversification Extremely Important”

State Rep. Ralph Ayres (R-Chesterton) helped write the final version of the bill, which had the support of the entire Lake and Porter County delegations.

“The area is still strongly dependent on steel,” Ayres said. “Even though we’ve gone through bankruptcies and consolidations, the future of the steel industry there is unknown. Diversification is extremely important.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.