INDIANAPOLIS – The town of Rockville, with 2,500 residents, is one of the smallest county seats in the state but come October it will be swarming with tens of thousands of people. Lured by a 10-day festival that celebrates the “Covered Bridge Capitol of the World,” those visitors will spend more than $1 million on food and libations.
Town leaders want to capture more of those dollars to pay for wear and tear on infrastructure, but state legislators have rebuffed their attempt.
Legislation to allow Rockville and other communities to adopt a 1 percent tax on the food and beverages sold in bars, restaurants and taverns died in the last session of the General Assembly and faces tough odds in the next.
That doesn’t sit well with Rockvillians including Parke Swaim, a Republican town councilman and restaurant owner who argues that such a small surcharge – 40 cents on a $40 tab – would go a long way toward supporting his town’s only industry.
“Tourism keeps this town alive,” Swaim said. “You know when the tourists are here, and you know when they’re not. Because when they’re not here, you’re hanging by a thread.”
Of Indiana’s 658 cities, towns, and counties, only 26 have been allowed by the Legislature to adopt a food and beverage tax in addition to the state’s 7 percent sales tax on food and drink sold in restaurants.
Almost half of those surround Indianapolis, including the seven “doughnut” counties that agreed in 2005 to pay half their revenues to help fund the new stadium for the Indianapolis Colts.
“It defies logic as to why every community should not have the ability to implement that tax if they want it,” said Matt Greller, executive director of the Indiana Association of Cities and Towns. “What’s good for one community and not good for another is a just tough thing to swallow.”
Greller’s association plans to push for a measure to give all local governments the ability to levy a food and beverage tax without first having to get the permission of state lawmakers.
Supporters say communities need the option to offset revenue losses from property tax caps imposed by the Legislature in 2008. Those caps, originally estimated to reduce local revenues by $500 million annually, are now projected to pull about by $800 million from local government coffers.
Greller – whose group supported similar, failed proposals for local flexibility over food and beverages taxes in past years – says there’s a new sense of urgency.
“Finding a new revenue stream continues to be a critical need for communities all across Indiana,” he said.
That argument has fallen on deaf ears.
Earlier this year seven communities – Angola, Danville, Elkhart, Goshen, Greenwood, Rockville and Rushville – sought lawmakers’ blessing to start the process of adopting a local food and beverage tax. Each presented resolutions passed by local leaders and lined up business owners to support the measure.
The Legislative Services Agency estimated the tax’s impact would range widely, raising almost $2 million a year for Elkhart and $110,000 for Rockville each year. But the bill never made it past its first committee hearing.
“Whenever you hear ‘tax increase’, it gives my colleagues in my caucus heartburn,” said Rep. Alan Morrison of Terre Haute, a conservative Republican whose district includes Rockville and who carried the legislation with fellow Republican Rep. John Price of Greenwood.
“At the same time, we talk about the need for local control and the ability of people with boots on the ground to know what’s best for their communities,” Morrison added. “If we’re going to talk that talk, we need to walk it as well.”
The Legislature’s fiscal gatekeepers say they are wary of giving local governments more flexibility to impose taxes. Senate Appropriations Chairman Luke Kenley, R-Noblesville, says the current arrangement – in which communities seek legislative approval on a case-by-case basis – forces local leaders to build consensus and prevents “bad fiscal decisions.”
“I know they don’t like to have the state have say in what they do, but we’re kind of on the horns of a dilemma,” Kenley said. “If we say to them, ‘You do whatever you want,’ and then they do whatever they want and get in trouble, then they blame the State.”
Back in Rockville, that reasoning doesn’t hold much water.
The town, steadily dropping in population for the last decade, is in a county that ranks 87 of 92 in the state for per capita income. Two state parks and a prison – on property that isn’t taxed – assume large areas of the county.
But 31 covered bridges, which date to the 19th century, along with scenic lakes and forests draw more than 1 million visitors a year, according to state tourism officials. The Covered Bridge Festival attracts more visitors than any festival in the state.
Dr. Steve Waltz, a family physician who grew up in Rockville and sits on the town board, considers himself a fiscal conservative. But the Republican Waltz supports the tax to repair sidewalks and streets.
“My view of conservatism is, don’t utilize things you don’t need but pay for whatever you utilize,” he said. “People want places that are safe, inviting and in good repair. And for that, you’ve got to pay your fair share.”
The matter, he argues, is best settled in Rockville, not at the Statehouse.
“Really, whether Rockville has a 1 percent tax on food that’s purchased in town, is that really worthy of the state Legislature’s time to decide that? That’s one piece of control that can be given to local governing units and not endanger the economic welfare and safety of this state.”