Must Bloomington Grow?

By Peter Dorfman

Bloomington, Indiana is a virtual one-party city, dominated by its local Democratic Party, currently centered around Mayor John Hamilton. The Hamilton years have been characterized by a grandiose vision of Bloomington as a city several times its actual size, growing much more rapidly than it is, offering knowledge job opportunities that are not here, and drawing significant in-migration from southern Indiana, which it isn’t.

An abridged version of this article appears in a special edition of The Ryder Magazine, in January 2022.

The hallmark of the city’s agenda is aggressive pursuit of growth. The mayor’s oft-repeated rationalization for annexing the city’s suburbs is telling: Bloomington has grown continually over its 203-year history, but its borders haven’t expanded in the last 17 years. We’re overdue for super-sizing. It’s what cities do.

Is it, though?

Hamilton was first elected in 2015; he was re-elected unopposed in 2019, after sweeping the Democratic primary, in which voter turnout was 8%.

In such an inbred political climate, Hamilton’s administration and commissions have had free rein to advance an opaque, rarely-challenged vision presented as if it were consensus. The heart of that consensus is that Bloomington is big and getting bigger rapidly — the intellectual and economic engine of southern Indiana, with all the opportunities and problems that status entails. Reality, though, is catching up with Bloomington. The truth is that we’re a small town, growing nowhere nearly as fast as our political and business leaders have claimed. 

It’s hard to know with precision how populous Bloomington actually is. For several years, city planning documents, including the 2020 Housing Study commissioned by the administration, have estimated population by taking the 2010 census figure for Bloomington (80,405) and projecting a straight line one percent growth rate. The Housing Study cited 84,058 as Bloomington’s 2018 population.

Mayor Hamilton has repeatedly asserted that Bloomington grows at a steady thousand residents a year. It’s not true. It is well documented that Bloomington’s growth has been at best roughly half this rate. The administration’s own planning staff admits this. But the Mayor goes right on citing 1,000 a year as the city’s growth rate, even as his own staff has stopped basing development decisions on that fiction.

The 2020 Census showed Bloomington actually losing population. It was a rude shock to the administration and planners who were counting on documented growth to justify their various housing initiatives, especially the 2021 amendment to the Unified Development Ordinance that swept away single family zoning. Of course, the administration has criticized the 2020 Census as flawed and unrealistic, and it probably was. Still, the city’s own November 9 press release on its “sister city” agreement with Palo Alto, California states Bloomington’s population as 80,500 — essentially zero growth from 2010.

A regional economic engine? Bloomington has a thin employment and industrial base. Beyond Indiana University, the largest employer, Bloomington has a small life science industry, but it is concentrated out in Monroe County, and the city has never shown it a compelling reason to move operations into the city. Catalent and Tasus, prospective anchors of the Trades District on North Rogers Street, backed away from plans to build office capacity there.

The city and local technology industry cheerleaders have argued that Bloomington could have a rebirth as a micro-Silicon Valley, focused on ideas coming out of IU’s School of Informatics. IU’s venture funds and the Dimension Mill (the start-up incubator in the Trades District) have spawned some new companies, but the city’s thin technology talent pool and low wages have made it difficult for entrepreneurs to grow them into real  businesses here.

Our largest employer, IU, can admit larger freshman classes each year, but with overall college enrollment trending down nationwide, it can only do so by lowering its admission standards — strategically problematic for a university with a “public Ivy” reputation.

As for regional political and intellectual influence, IU, through entities like the Council for Regional Engagement and Economic Development, is doing its best, but southern Indiana barely seems to notice what Bloomington says or does. The last three Democratic candidates for Indiana’s 9th Congressional district seat were worthy public servants from Bloomington; none managed to dent southern Indiana’s impenetrable Republican edifice.

Thus, if Bloomington is growing, either in population, economic output or political clout, it’s from a very modest base. Growth clearly is the Hamilton Administration’s first priority. But should it be?

It’s a truism that cities are in the business of growing. Certainly, if you own a shop or restaurant, you want your local customer base to increase. If the local economy thrives because the city has an inherent, differentiating competitive advantage in a specific industry, growth in that industry will raise living standards and create new opportunities. 

But Bloomington has no such competitive edge. The limestone business isn’t what it once was. Outside Monroe County’s small biomedical industry, the once-robust manufacturing sector has largely disappeared. Bloomington’s planned expansion of its technology sector is mostly based on wishful thinking. The city occasionally spawns a tech start-up, but lacks the engineering talent to grow it from ideation to commercialization stage. Given the city’s low wage base and the lack of an engineering school at IU, it’s difficult to see what attraction will draw that kind of talent here.

For Bloomington to grow, extraordinary effort will be required. Will it be worth it? Will our lives be better for it? The answers aren’t as clear cut as they seem.

Why do cities need to grow? Urbanists tell us a crucial driver of growth is the need to cover the city’s infrastructure costs — costs incurred a generation or two ago. When a city builds new infrastructure — roads, sewers, parks, bike lanes, etc. — financial institutions rush in to fund the projects. Why? Because the new debt can be financialized — converted into tradable securities, similar to stocks and bonds, which they then sell to investors. It’s equity funding, and it’s relatively cheap money for the city.  

A generation down the road, though, that new infrastructure will have to be maintained. Maintenance is expensive, as is the money the city will need to borrow to pay for it. It’s much harder to attract equity investors to fund maintenance. So the city constantly needs to increase its tax base to cover this expense. Because raising tax rates is politically risky (and limited by state law), the city has to get bigger to expand its tax base. The urban development consulting firm Strong Towns refers to this as the “Growth Ponzi Scheme.”

That kind of growth is relatively easy if the city is attracting a rapid inflow of new residents and has a robust supply of good-paying jobs to support them. As we have seen, neither is the case in Bloomington. What, in fact, does Bloomington have to sell that the rest of the country is buying? 

It has a real estate market where residential rental demand has been constant, rents have consistently risen, and property values have shown consistent historical growth, the pace of which is accelerating. Bloomington is ripe for predatory investment in private equity-backed rental housing development because of its strong rental growth history and its stable market driven by student rentals. And within a national pricing context, Bloomington’s core housing is a bargain. Investment cost versus return is extremely favorable.

In this context, Bloomington’s recent upzoning, eliminating single family zones to make way for denser housing in its core, makes sense as a strategy to increase the city’s tax base. Upzoning injects more speculation profit into the neighborhoods which raises the prices of properties. It also creates a strong incentive for rental development — the city can tax rental properties at a higher rate than owner-occupied properties. Upzoning also immediately raises land values, pushing tax assessments up. Indiana has a cap on the potential increase, which limits the amount that could be raised simply by raising the rate. But there is no cap on assessments. 

The upzoning plan met loud opposition from residents of the neighborhoods where upzoning will increase housing density, as well as raising property taxes. The mayor and Planning staff dismissed that opposition as “fear of change”; pro-growth advocates portrayed denser development as more equitable, environmentally responsible urban policy and tagged opponents as Luddites, racists or climate change deniers. 

And the administration sold the plan as a strategy to address the city’s ostensible shortage of housing. There’s just one problem with that rationalization: Bloomington doesn’t have a housing shortage. According to several recent analyses, including the ROI Uplands Regional Housing Study, Bloomington is projected to need somewhere between 5000 and 5500 new housing units between now and 2030. That’s eight years from now. Review recent approvals for new construction, in the city and in Monroe County, and it becomes clear that we’re actually ahead of schedule to meet that demand. And the need projections have been based on a population growth rate that hasn’t been borne out by local reality.

Of course, Bloomington will get bigger, by annexing its suburbs. But annexation won’t draw an influx of new residents or workers — those people are already here. The only real difference is that about 14,000 of them will be paying higher city taxes. Pro-density advocates would love to see a lot of them move closer to downtown; it’s unclear what incentive there would be for such a move, especially because few of them actually work downtown.

Growth is at the top of Bloomington’s agenda. Growth into what seems largely beside the point. Growth is measurable, and that explains a lot of its appeal to mayors, city council members and Chambers of Commerce. Success in growing a city’s boundaries and budget is the kind of thing that makes political careers. But it’s worth asking how the regular folks in a town like Bloomington benefit from urbanization, overburdened amenities and higher taxes. 

It’s too late to avoid the eventual responsibility of maintaining the new parks, bike infrastructure and other amenities Bloomington has created over the last decade. But we can consider alternative strategies for managing the city’s assets and future liabilities. We can stop blindly accepting that urban growth is an inherent good.

  • Let’s start evaluating economic initiatives not on whether they draw more people into Bloomington, but rather on what those initiatives do to raise our area median income.
  • Let’s broaden our focus beyond high housing costs and concentrate on providing jobs at income levels at which people can afford to live here.
  • Let’s work to attract remote workers employed by companies on the coasts, companies that pay their people above-Bloomington wages.
  • And let’s think twice about new urban infrastructure.

Let’s look for a way off the growth treadmill.

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