Bruce Lilly

                                                                            Professional Writer and Editor





Writing samples — Business articles
All of the articles on this page were published in Business Network magazine, a publication of the Greater Bloomington Chamber of Commerce. 

Green Planning 

Green space—any serious attempt to fashion a plan for growth must acknowledge the need for areas where no building is allowed.  There may be heated debate about how much green space is needed and where it should be, but everyone mostly agrees that preserving some land from development is critical to maintaining the community’s overall quality of life.   Preserving green space in south-central Indiana is the simple and straightforward mission of the Sycamore Land Trust.  Established in 1990 by a group of people who wanted to insure that scenic areas and wildlife habitats in this area were protected from development, SLT now owns over 1000 acres of land and has over 500 members. 

To say that they want to preserve green space is not to say that they are anti-growth.  “We’re not anti-development at all,” says SLT Development Director Christian Freitag, “but we do caution against unchecked development.  The area is growing because it’s a beautiful place to live in terms of natural beauty.  It’s given that we’re going to grow, but we don’t want that growth to adversely impact our quality of life.”   Freitag goes on to explain that since SLT refrains from lobbying on environmental or political issues, it can accommodate people from a wide variety of backgrounds who share a common belief about the value of green space. 

SLT lands are generally open to the public for such activities as hiking or birdwatching.  (Camping and hunting are not allowed, however.)  Membership is available to families for $30 a year or to students for only $10 a year.  The more money they raise, the more land they can protect.  Support for SLT’s approach can be seen in the group’s recent growth.  In the year and a half since Freitag became SLT’s first paid staff member, both the land protected and the membership have doubled.  He hopes this trend will continue and he has reason to think it will, because, as he says, “Land trusts are the fastest growing conservation method in the country—bar none.” 

For more information, contact Christian Freitag, Development Director, Sycamore Land Trust, (812) 336-5382, e-mail:

The Property Tax Reassessment Maze 

If you find the news concerning the state’s property tax reassessment confusing, then join the crowd.  A lawsuit that originated in Lake County 8 years ago has set in motion court-mandated changes in the way real property is assessed in Indiana.  Until these changes, Indiana was one of only two states in the country (Nevada being the other) that based property tax on something other than market value. 

Understanding what Monroe County Assessor Judy Sharp calls “the most complicated and complex thing we’ve ever had to do” involves a grasp of market value, property tax levies, true tax value, and local taxing units, among many other terms. Of course, businesspeople and homeowners simply want to know the bottom line: how much more—or less—will my tax be?  Unfortunately, there is no simple answer to that question. 

Answers are elusive because this is a work in progress.  If no action were taken to counter the effects of reassessment, the average homeowner would see a huge increase in property tax.  People on all sides recognize that this must be averted. The sweeping tax reform proposal unveiled in October by Gov. O’Bannon and Lt. Gov. Kernan has provisions specifically designed to mitigate the expected rise in property taxes. 

The tax package ranges over a much broader area than issues around property tax, but the reassessment order provided what State Senator Vi Simpson calls “an impetus for making some overdue changes.”  Ultimately, she wants to go beyond the effort to simply counter increases in property taxes, saying, “The Lt. Governor’s plan and my own efforts at tax reform have several objectives in common, one of which is reducing property tax.” 

The deadline for completing the reassessment is March 1, 2002.  Sometime after that all property owners will receive a notification of their property value.  “After receiving your notification,” Sharp says, “if you feel that your property has been assessed incorrectly, you should call your township assessor right away to discuss it.  You have 45 days to appeal.”  For more information on this topic visit a web site created by Purdue University: 

Growing Wisely 

Talk to people in Bloomington about growth and the same phrase comes up over and over again: quality of life.  The city’s new Growth Policy Plan Update wastes no time in getting to this point, concluding the first paragraph of the Vision Statement by saying that the plan hopes to “provide a vision for how the community can maintain and enhance its quality of life.” 

This is no simple task.  As the Vision Statement acknowledges, “ ‘quality of life’ means different things to different people.”  Some people emphasize the availability of secure, well-paying jobs; others immediately point to the importance of a good school system.  Parks and greenspace top the list for some, while others care most about a vibrant and vital downtown area.  And that’s only the beginning—traffic and transportation, sports and cultural events, safety and security, neighborhoods and shopping areas—defining quality of life can be quite involved. 

Despite these differences, many people say that Bloomington currently provides a good quality of life for most of its residents.  The challenge is to preserve and improve the quality of life.   Interviews with several local business leaders reveal that one point must be stressed: quality of life is not free.  It requires the foundation of a strong and vibrant local economy. 

“Remember that business accounts for 60% of the tax base here,” points out Jim Murphy, president of CFC, Inc., “and a lot of the money that supports community events and non-profits come from businesses.”  Murphy also stresses that, if you’ve lost your job from a local manufacturing plant, other quality of life issues become irrelevant.  “Bloomington is going to grow,” he says, “the issue is how we manage that growth.” 

Eric Stolberg, president of Winniger/Stolberg Group, Inc., has some suggestions.  “We’re in a transition period from manufacturing to employment clusters,” he says.  Those clusters include educational employers (IU and Ivy Tech), the medical instruments industry centered around Cook, Inc., a growing focus on Bloomington as an attractive location for retirees, and the convention and tourism trade. 

“We’ve seen amazing growth in the retirement community,” Stolberg points out, “and I see this as very positive.  These people bring valuable experience, they give time as volunteers, and they bring more wealth into the community.”  He’s also optimistic about Bloomington’s ability to attract conventions and events.  “I think Valerie Peña at the Convention and Visitors Bureau is doing an excellent job,” he says, citing recent events such as the Harley-Davidson state convention, and national softball tournaments. 

On top of all this, as incoming chair of the Bloomington Economic Development Corporation, Stolberg envisions working with Indianapolis and Lafayette to create a high-tech, information technology corridor in this region.  Central to this idea, and to Bloomington’s growth in general, is having access to a major highway.  “We need I-69,” says Stolberg. 

The idea of focusing on high-tech development also appeals to Steve Ferguson, executive vice president of Cook Group, Inc.  “Technology changes so rapidly today,” he stresses, “and that means businesses change and jobs change.” 

For Ferguson, one of the keys to keeping pace with these changes is to have an educated workforce.  “IU is one of the most highly wired campuses in the country, and companies like to be near such universities,” he explains, “because it means they can find the people needed to fill their jobs.” 

Lee Carmichael, president of Weddle Bros. Construction, agrees about the benefits of having a major research university here.  “IU offers a lot of potential,” he says, “through its work in science and through the business school.”  He cautions against focusing in only one area, however, saying, “We need balanced growth, and that means we should also be trying to get more manufacturing jobs.” 

“Balanced growth” is clearly the goal of the GPP Update.  Bloomington Planning Director, Tom Micuda, says that the key to balance is looking at both “how we grow” and “where we grow.”  In terms of “where we grow,” the downtown area takes center stage for many people. 

“The GPP Update promotes more urbanization and redevelopment,” Micuda says.  “Currently, there is too much property—both commercial and residential—that is underutilized.  One change that will help this is an increase in residential density limits.” 

Density limits are just one element in the discussion of “compact urban form.”  Murphy finds this matter essential to increasing the vitality and vibrancy of downtown.  “We need plans that don’t just support suburban growth,” he says, “but that also help us manage urban growth.” 

Another important issue addressed by the Update is called “concurrency,” and this involves the problem of installing new infrastructure along with new development.  Micuda, admitting that this can be a “hot-button issue,” says, “Developers already incur expenses on infrastructure and think the government should do its fair share.  The city needs a systematic approach to handling this matter, but regulatory change will take time.” 

Carmichael thinks the issue deserves attention, because, he says, “Our community is currently behind on our infrastructure, and much of it is aging and obsolete.  Any plan for growth must address the City’s responsibility for providing adequate infrastructure.  Otherwise, the ripple effect over the next 10 years will harm any efforts to attract new business.” 

Planning growth for the next ten years is the precise goal of the GPP Update, and Micuda is eager to see it completed.  “It’s not a regulatory document,” he reminds us, “Instead, it sets policy that guides the creation of ordinances.”  Once the Update is finished and approved, attention can be redirected to regulatory change. 

Bloomington faces change and growth, and there are a variety of ideas about the best way to manage this growth so that the quality of life is maintained and enhanced.  Still, as Carmichael points out, “Some things must be happening right in this community, because so many people want to live here.” 

A Look Ahead: Bloomington’s Economy in 2002 

Predicting the future—many times we fail miserably at this task, and, at best, we only get it half right.  The extraordinary events that have occurred this year only underscore the point.  Still, despite the aggravation involved, it cannot be avoided.  Any business must attempt to conjure up visions of what lies ahead from some type of crystal ball.  An intelligent take on what the next year might bring is essential to business success.  To assist with this effort, Business Network spoke with a number of people around Bloomington and asked them to share their predictions for the year ahead. 

One general theme became clear—Bloomington’s economy is weathering the current storms reasonably well and it should remain steady in 2002.  Whenever the nation suffers a recession, as it is now, some places catch it hard and others manage to sidestep the brunt of the downturn.  In this case, Bloomington is holding its own. 

“For a town like Bloomington, I suspect housing is a pretty important sector, and transportation is not,” explains Larry Davidson, Professor of Business Economics & Public Policy at the IU Kelley School of Business.  “We don’t have an airline in Bloomington.  Now, we do have travel agents and I’m sure that they are suffering greatly from this, but when you look at the overall proportion of the economy, the fact that housing has done well nationally and the fact that travel and transportation have done so poorly would probably suggest that Bloomington would do better than average, because housing is important to us and travel and transportation isn’t so important.” 

Davidson goes on to mention two other aspects of our local economy that partially shield it from national trends.  For one thing, recession often causes layoffs at manufacturing plants, but Bloomington has fewer and fewer of these jobs.  “With less manufacturing than we’ve had in the past, it makes us a little less sensitive to these boom and bust cycles,” says Davidson. 

The other stabilizing factor is the town’s largest employer, IU.  “The university is important to Bloomington,” he says, “and it’s not particularly susceptible to these kinds of changes.”  Gov. O’Bannon’s recent proposal addressing the state’s fiscal crisis may reduce spending to IU, but the specifics are still unclear.  Despite this, the university is certain to remain a positive influence on Bloomington’s economy. 

Word from local realtors supports Davidson’s comments about housing—at least, in part.  “We’re not very far off where we were last year, and last year was an excellent year,” says John West, F. C. Tucker/OBR REALTORS Managing Broker.  However, that’s only part of the story.  West explains that because of low interest rates, some people are buying more expensive homes than they originally intended.  “But it’s kind of a two-edged sword,” he continues, because other people use the low interest rates “just to refinance and stay where they are.  So, now they’re not particularly candidates for new housing.” 

Looking ahead with the assumption that interest rates remain close to where they are now, West sees the potential for increased demand.  “I think there’s going to be some pent-up demand that will explode a little bit, and we’ll see some resurgence in the marketplace,” he says. 

Talk to Larry Pickens, co-owner and Principle Broker, Century 21 Realty Group—Sabbagh Pickens, and you will hear a similar tale.  “I think the Bloomington economy is going to be fine,” he says.  I don’t see a tremendous growth in it, but I think we’ll be where we were last year or ahead, and I base that on our business, because the transfers are still coming and coming and coming in, and not going out.  The city’s growing.  We’re having the best fourth quarter we’ve had in three years.” 

While home-buying seems to be continuing well, the recession has affected investment purchases of real estate.  With the stock market down and thus with many people reluctant to cash out stocks, there’s less money available to invest in real estate.  “There’s not nearly the number of investment buyers out there as we had seen even a year ago,” West says.  “People are just hanging on to whatever cash they have and they’re not making a lot of investment purchases.” 

Likewise, West is not particularly optimistic about the commercial real estate market.  “This calendar year has been pretty slow,” he says.  “I don’t have any reason to think today that it’s going to change much in the first six months of next year.  It’s going to take an infusion of some new money (i.e. new employers, some new businesses).  We’ve got over a million square feet of vacant commercial buildings in this town.  There’s just too much of it.” 

Realtors, of course, are not the only ones concerned about “an infusion of new money.”  Gerry Reynolds, General Manager of Borders, comments about the loss of manufacturing jobs here over the past several years, “If there’s less money in the local economy, then there’s less money in people’s billfolds.  They’re going to cut back on their book buying, like anything else that’s not a necessity.” 

Though Reynolds is guarded about making predictions, he is not overly worried about the months ahead.  He says that he thinks “the economy will probably turn around as will sales at Borders,” adding, “I expect things might spike up again dramatically.  I’m hoping.” 

Reynolds, like all retail managers, faces difficult decisions constantly.  Talking about the affects of September 11 on planning, he says that guessing how the economy will develop is hard enough—such unexpected national events just make it that much more challenging.  “At Borders,” he explains, “a big part of the expense is payroll.  You have to hire and maintain a staff that’s equitable to your retail sales.” 

Smaller stores play a different game to some degree, says Denise Lessow, owner of Bare Essentials.  Her store has more flexibility than a large department store, she points out, “where your inventory is controlled by a central office, several states away, eight months ahead of time.”  Being small allows her to be “very responsive” to her customers.  The aftermath of September 11 brought this ability to bear, says Lessow, when she saw a sudden surge in orders for wedding gowns.  Some people in the military who were planning weddings moved up their wedding dates in anticipation of being called into service soon. 

In the larger picture, September 11 has certainly had severely adverse affects on the economy, but not all retailers have seen an overall drop in sales.  In talks with other merchants, Lessow says, she learned that “people like florists or chocolate vendors actually had a little surge in business after the event, because people were looking for comfort food.  They’re sending gifts to each other as a means of bonding and consolation.  And restaurants similarly had an increase.”  Nevertheless, one result is a greater wariness about predicting the future.  Asked about her predictions for next year, Lessow responds, “At this point, given the current situation, I’m not even looking that far ahead.” 

Some people, of course, always tend to see the glass as half-full, not half-empty.  Bob Sullivan, owner of Sullivan’s, is a person who has a generally positive outlook for the future.  “I think once we can get the world situation straightened out,” he says, “and we can get the stock market going back again, then I think things are going to be very good here.”  Sullivan goes on to say that, precluding any more “tragedies” or “huge blips in the stock market,” he expects sales at his clothing store to increase “probably in the five to seven percent range” in 2002. 

Part of his store’s advantage, according to Sullivan, is that owner-operated stores like his can provide “better quality service, better product placement, that sort of thing.”  He also likes his location—downtown Bloomington.  “I feel good about downtown, because we’re unique,” he says. 

This point of view strikes a chord with Talisha Coppock, Executive Director of the Downtown Bloomington Commission.  She notes that safety has become a prime concern for many shoppers, and that in addition to offering a wonderful assortment of unique shops, downtown Bloomington provides a sense of security to many people.  “Downtown is especially well positioned this holiday season because shopping in a downtown area is a holiday tradition,” she explains.  “People like that comfort of knowing their store owners and knowing the area, and purchasing special gifts for a loved one that are unique.” 

Though “people are watching their dollars” in this tightening economy, Coppock feels that Bloomington is managing well.  “Bloomington is obviously being hit less hard than a lot of other places,” she says.  “Our economy is still very strong.”  In addition to giving the university credit for helping to keep the local economy stable, she mentions another point.  “People are wanting to stay close to home,” she says, “and people are probably going to be driving as opposed to flying.  So I think Bloomington has an advantage, because we are a regional shopping center.” 

A matching perspective can be heard from Valerie Peña, Executive Director of the Monroe County Visitors and Convention Bureau.  “The one thing we’ve always been very well noted for is being a safe community to visit, having kind of a quaint feel, with large city offerings, but not the safety issues or some of the other problems of a larger town,” she explains.  “We will probably take advantage of that, especially the first six months of next year, since the pattern shows that people are going to go places they can drive, probably no more than five hours out.” 

While Peña acknowledges that tourism has taken a hit this year, she says that Bloomington will only be down about 4% for the year.  When you compare that to other places, where tourism is off by a third, a half, or even more, it is not surprising that Peña feels good about it.  Looking to 2002, she expects “the first six months to be relatively flat,” but to do better in the second half of the year. 

Ask her about events on the calendar for next year and she starts listing them month by month.  The university is sponsoring Arts Week in February; the Dalai Lama will be here for a visit in April; the Nike Memorial Weekend Basketball Classic occurs in May; a HPER Symposium will be here in June; the Order of the Arrow, a Boy Scout event, comes to town in July; the Men’s 40 and Over National Softball Tournament will be held in August; the Lotus Festival repeats in September; and the Hilly Hundred will be run again in October.  

This is a nice list, but Peña warns against taking tourism for granted.  “Probably the biggest challenge we have as a community, in order to keep up with what a lot of places are doing, is to continue to develop attractions and to assist entrepreneurs in developing attractions,” she says.  One idea receiving attention is something Bloomingtonians largely take for granted—limestone.  “We have not embraced our limestone heritage nearly to the level it needs to be embraced,” Peña asserts.  “It’s famous!  I’m amazed when we go places people say, ‘Oh, I was in a building that came from Indiana limestone.’” 

So a limestone theme park may be in our future some years down the road, but as for next year, the general consensus is that Bloomington’s economy remains on firm footing.  There are challenges that cannot be avoided, and unknowns that will only reveal themselves as the year passes, but we seem to be in a good position to meet our challenges head on in 2002. 

"I think the article is excellent."
 —Larry Davidson, Professor of Business Economics & Public Policy
at the Indiana University Kelley School of Business

An Update on the Update: The Growth Policies Plan in 2002 

A plan for growth must eventually translate into action.  For the Growth Policies Plan Update, that time is nearing.  In 2002, we should see the GPP Update finalized.  Then begins the task of formulating ordinances and zoning codes that embody the ideas in the plan. 

But putting plans into action is not always so easy, and the GPP Update addresses this in a section called “Implementation Strategy.”  The original plan from 1991 had 42 policies, 50 objectives, and 67 implementation measures, but as the Update states, “Little guidance was provided as to the priorities to be placed upon these policies, objectives, and implementation measures, and as a result, a significant amount of these initiatives have never been realized.” 

To correct this shortcoming, the Update has created “a comprehensive series of policies and implementation measures that are well organized, easy to understand, and ultimately able to be implemented successfully.”  The plan has seven guiding principles, and for each of these a matrix has been created that lists and prioritizes the goals, policies, and implementation strategies.  The matrix also gives a time frame for completion along with a list of the agencies involved and the specific steps of action necessary. 

So, as these actions are taken, what will that mean for Bloomington?  First, remember that, as Planning Director Tom Micuda points out, “it's the adoption of actual ordinances rather than comprehensive plans like the GPP that have a greater impact on development patterns.” 

Furthermore, even though Micuda hopes the plan will be adopted by the Plan Commission and the City Council during the first quarter of 2002, there are still unresolved issues.  “Policies concerning design review, concurrency, greenspace preservation, and desired downtown density need to be agreed upon during the adoption of the updated GPP,” he says. 

Linda Williamson, President of the Bloomington Economic Development Corporation, agrees that several matters still need to be addressed, mentioning specifically the issue of density.  “One of the positive impacts I am hoping for is the allowance of small companies in the IU Research Park, the Business Incubator and other areas,” she says.  “These companies prefer to have offices downtown, and I would hope to see opportunities for office development with more density.” 

She also cautions, however, about expecting to see changes rapidly.  “Because there will be a long discussion on any proposed changes to the zoning ordinances, I think it is too early to speculate what the impact will be on the local economy,” she adds.  Micuda does expect some laws to be passed next year concerning “such topics as sewer service extension policy, design standards, and desired residential density in the downtown.”  Like Williamson, though, he warns against expecting too much, saying, “it is uncertain whether the entire update of the City's Zoning and Subdivision Ordinances can be completed in 2002.” 

On top of this, the nature of the construction business is that work proceeds in stages that stretch over months and into years.  Jim Murphy, president of CFC, Inc., points out that “everything that’s already been approved to date, but not yet built will be going through the process of being built.”  So, there’s always a lag between the passage of new ordinances and the completion of buildings built under those new rules.  At some point in the future, though, “one year, two years, or five years,” Murphy adds, we will see the results of the Growth Policies Plan Update in action. 

Time for Change: The Lieutenant Governor’s Tax Restructuring Proposal 

What is your wish list for changes in the tax code?  (And no, completely eliminating all taxes is not an option.)  Would it be good if we could reduce property taxes?  What about changing business taxes to remove the barriers to investment?  Do you approve of the effort to make income tax more equitable? 

The next question is: if we agree to the general ideas, how do we work out the details?  Taxes are complicated, and tax reform generally increases the complexity of the rules, even if the taxes themselves decrease.  Getting people to agree on the general ideas is hard enough; making the details palatable to all is practically impossible. 

Nevertheless, in an effort to address this challenge, Gov. O’Bannon and Lt. Gov. Kernan have presented “Indiana’s 21st Century Tax Plan.”  The ideas in this plan, which comes from five months of work by the lieutenant governor and a group of fiscal experts, provide a massive restructuring of taxes.  In fact, O’Bannon says that this is the first comprehensive plan to restructure Indiana’s tax code that has ever been offered. 

Why do it now?  Changing tax law is never easy.  Some of the changes proposed have been debated for years, but one thing is now different.  The court-ordered changes in property tax assessment, if left alone, would increase the average homeowner’s tax bill by 33%.  Something had to be done in response to this, and O’Bannon and Kernan saw this as an opportunity to do much more. 

“We have looked at every aspect of our tax structure, and we've come up with a package that meets our goals of protecting homeowners and promoting economic growth," the governor said when unveiling the plan in Indianapolis on October 18.  The lieutenant governor added, "Our plan decreases the state's reliance on property taxes and improves the economic competitiveness of our tax structure." 

If those are the general ideas, then what are the details?  For starters, the plan would eliminate the inventory tax, eliminate the corporate gross income tax, and increase the research and development tax credit to 20 % from its current rate of 5%.  According to State Senator Vi Simpson, the purpose of these changes is to “remove the barriers to business investment.  Indiana is one of the last states with an inventory tax, which is a disincentive to inventory-heavy companies.  Also, most other states have a franchise tax, a profits tax, or a value-added tax, not a corporate gross income tax.”  Increasing the R & D credit to 20%, she explains, “would make Indiana the most attractive state in the nation” in this category. 

But the loss of revenue resulting from these changes must be made up elsewhere.  To solve that problem the plan calls for tax increases and new taxes.  The state sales tax would go from 5 cents on the dollar to 6 cents, and the state income tax would change from a flat rate of 3.4% to a progressive structure charging 3.9% on the first $90,000 of state taxable income and 4.4% for all income above that.  There would also be a corporate net income tax of 8.5% and a business franchise tax. 

Whether you view these changes as good or bad depends on the nature of your business and on details that still need to be worked out.  Some small business owners are concerned that the main tax advantages go to large companies that maintain high inventories or engage in extensive research and development. 

"I don't see the tax plan as helping me out,” says Rob Hunter, president of R & D Computer Hardware Concepts.  “For one thing, it puts small business and LLC's that do not require corporate status in limbo, and taxing services strikes at the very heart of small ‘service economy’ businesses. Some taxes are being reduced, so somebody's got to take the hit. I just don't want it dumped in the lap of small businesses.” 

Linda Simon, president of Stampfli Associates, a CPA firm, voices similar concerns, saying, “The proposed plan is a substantial shift in the imposition of business tax.  In general, it will ease taxation on the bigger manufacturing companies, and increase the taxation of smaller service companies and of start-up or early stage businesses.” 

The lieutenant governor is aware of this criticism, and wants people to look at the plan as a complete package.  Tina Dennis, the lieutenant governor’s press secretary, says, “We believe that when small businesses take a look at the plan as a whole, they’ll see that with the property tax cuts, the investment tax credit, the research and development tax credit, and the elimination of the inventory tax and the corporate gross income tax, it’s good for them.” 

Dennis goes on to stress that nothing is set in stone.  “We’re wide open to ways of making this plan better.  Any ideas that the small business community might have, we’d love to hear them, as would the general assembly,” she says. 

A specific element of the plan that they are already hearing about is the franchise tax.  Part of the problem is that no one is sure yet how it would work.  Eric Slotegraaf, a lawyer at Andrew, Harrell, Mann, Carmin & Parker, who specializes in tax law, says, “I haven’t seen any specific proposals on what a franchise tax will mean to Indiana.  I think there’s probably a lot of confusion out there about exactly what a franchise tax is, and how it will affect businesses in Monroe County.” 

Simon provides an idea of some of the questions that remain unanswered.  “This tax could be based on level of assets, or number of employees, or a combination of these and other factors, or it could be a flat tax,” she points out.  “It is unlikely to be based on net income.  Further, we do not know whether it will apply to sole proprietors or to partnerships or even to not-for-profits.  My concern is that this tax would be particularly onerous for start up businesses which generally lose money for the first year or two but may nonetheless face an annual franchise tax.” 

More details about the franchise tax will be released soon, according to Dennis, but a separate matter threatens to undermine the entire plan.  A lawsuit filed with the Indiana Tax Court challenges a provision of the new property tax assessment rules, known as the shelter allowance.  This provision automatically reduces the taxable value of owner-occupied home by $16,000 to $22,700, depending on the county.  If the lawsuit is successful, and the shelter allowance is deemed unconstitutional, a huge underpinning of the tax plan will be lost. 

Monroe County Assessor Judy Sharp emphasizes that the matter “needs to get resolved immediately.  Whether it is constitutional or unconstitutional has got to be decided immediately.  It cannot drag on in the courts and sit out there.”  Dennis agrees, saying, “I hope that the issue is taken care of quickly.  The shelter allowance is something that we think is fair, and it’s something that we’re willing to defend.” 

One way or another, it appears likely that Indiana will see some tax law changes in the next year.  If everything goes as planned, the legislature will act on the plan in the next session, which begins in January.  Some of the changes could become law next year. 

Any tax proposal elicits its share of criticism, and this one is no exception, but there is also support for the idea of trying to make important changes.  Sharp says, “I think that we must restructure.  This is a step in the right direction.  I’d like to see us even go further.”  Simon offers similar sentiments, saying, “Quite honestly, I commend the governor, lieutenant governor, and the members of the state government, for embarking on this ambitious task of analyzing the entire tax structure and attempting to make better sense of it rather than simply tinkering around the edges and creating an even more baroque structure.”  Slotegraaf rounds out the chorus by saying, “I’m very pleased to see that the Indiana tax structure is up for discussion. The governor and the legislature need to make some changes, and I think some positive things can come out of this.” 

Forum Addresses the State of Healthcare 

Keynote speaker and panelists discuss how healthcare is changing and how businesses are coping with these changes. 

The healthcare industry is changing.  Not all of these changes are for the better.  And the cost of getting care will continue to rise.  That is the message delivered by Ken Stella, president of the Indiana Hospital and Healthcare Association at a Chamber-sponsored forum that took place at Bloomington Hospital in December. 

More than ever before, consumers dictate the changes occurring in healthcare.  For one thing, consumers demand choice.  Health maintenance organizations (HMO’s) have never achieved much success in Indiana, despite the strong presence they have had on both the east and the west coasts, mainly because they reduce the range of choices individuals have in selecting a doctor.  Apparently, Hoosiers want to be able to pick their doctors freely. 

Consumer behavior further shapes healthcare through the internet.  An abundance of information sits within the reach of our fingertips now, as more and more people have ready access to the internet.  “The popularity of internet health sites is unbelievable,” said Stella.  These sites receive millions of visitors every day. 

Though not all of this information is reliable, it is there and people are making use of it.  “There is far more bad information on the internet when it comes to healthcare, than there is good information today,” he said, but he added that, right or wrong, this is a major source of information for many people. 

Drug companies, savvy to this hunger for more medical knowledge, now bypass doctors and market drugs directly to consumers.  Newspapers carry full-page pharmaceutical ads and television viewers hear pitches for a variety of drugs that can only be obtained through a doctor’s prescription.  The pharmaceutical companies place these ads because “they know that the choice in the future on healthcare is going to be with the consumer,” said Stella. 

The effectiveness of this marketing tactic rests upon an important change in the way patients view physicians.  Stella stressed that we have entered a new era in terms of our image of our doctor.  People no longer see doctors as a complete and final authority on medical decisions.  People realize that doctors make mistakes and they want to know about the mistakes, so that they can make an informed judgement concerning the competence of their healthcare providers. 

Now, Stella said, people want “to sit down and carry on a dialogue with regard to their disease.”  More and more, patients inform doctors about research they have done before coming into the office.  In some cases they tell the doctor that they have already reached a diagnosis and settled on a treatment.  All they need is for the doctor to prescribe a certain medication, and they will be on their way. 

Competition has also increased, having a significant impact on healthcare.  Newspapers now carry not only advertisements for drugs, but also for the doctors who prescribe them.  Not long ago, the profession shunned such blatant marketing.  

On top of all this, more people turn to alternatives forms of therapy than ever before.  Many health insurance plans now routinely pay for chiropractic care, massage therapy, or acupuncture.  Plus, countless other forms of therapy not covered by insurance have found favor with a growing proportion of the population.  Add to this the massive amounts of vitamins, herbal formulas, and other remedies sold, and it is clear that competition in the healthcare industry is thriving. 

Competition may be thriving, but there are some significant problems in the industry.  Chief among them is a shortage of workers, a problem described by Stella as “horrific.”  There are not enough nurses to go around, and we are not taking the steps necessary to encourage more people to enter this field, Stella said.  

Nancy Carlstedt, CEO of Bloomington Hospital and Healthcare System, agreed  and took it a step further.  “The shortage for pharmacists and radiology technicians is even greater proportionately than the nursing shortage,” she said. 

There has also been a major shift in government funding of healthcare, which has been in effect for about four years.  We have an aging population in this country and the government faces an incredible burden if it continues to fund Medicaid and Medicare in the way it has funded them over the years. 

Stella argued that federal budget cuts in healthcare played a significant role in achieving a balanced budget.  Given that more than half of the money coming into a hospital comes from the government in the form of Medicare or Medicaid payments, it is no wonder that hospitals are feeling a crunch from the huge cuts in the Balanced Budget Act of 1997. 

On top of this, the fiscal aftermath of 9-11 means that federal money is tighter in all areas.  It is still too early to know the exact impact on healthcare funding, but it seems safe to say that further decreases are coming.  Stella predicts that we will be running federal budget deficits for several years, due to the war on terrorism.  This will put increased pressure on the government to curb spending on Medicare and Medicaid.  Carlstedt said she was optimistic about increases in government funding before  the terrorist attacks.  Now, she said, funding increases are “completely off the radar screen.” 

All of these problems boil down to one problem for businesses—the cost of health insurance.  “Healthcare is important to business leaders, because it has a very strong influence on our ability to provide the most important aspect of the economic foundation of our community—and that’s good jobs,” said Steve Howard, the Chamber’s president.  A company’s benefits package can account for a significant part of any employee’s total compensation.  

Yet companies are caught in a squeeze—they need to offer good health insurance, but the cost of doing so continues to rise steadily.  Vickie Temple, owner of Bloomington Hardware, said in an interview that “Ten years ago Bloomington Hardware was able to shoulder 100% of the healthcare costs for their employees who were eligible.  Now I pay 75% for the employee and 50% for the dependents.  Last year we had a 30% increase.  This year we had a 50% increase.” 
Denise Lessow, owner of Bare Essentials, says that about two thirds of small businesses in the U.S. do not offer any healthcare benefits.  It is a simple matter of not being able to afford the premiums.  “If you look at the premiums for employer-sponsored health insurance for small companies in 2000, they increased an average of 12.5%, the largest increase since 1992,” said Lessow. 

One difficulty for small business owners is the time required to deal with the matter.  “This is a very complex issue, or we wouldn’t all be here,” said Lessow.  “It’s a challenging issue for me, as it is for many of my colleagues.  But we don’t know where to begin.  And we don’t have the HR or personnel resources that large companies have.” 

Carmen Odle, senior vice president of Human Resources at Monroe County Bank, told about the difficulty in managing health insurance plans for employees.  “In my case, I have to look these employees in the eye and say, ‘Our health costs increased over fifty percent last year.  Therefore we’re going to charge you a lot more for health care.’  These are tremendous problems.  They are ethical and moral problems.” 

One way to control costs is to focus on wellness and preventative care. “As employers, I think we have an obligation to teach wellness and to change lifestyles to the degree that we can,” Carlstedt said.  She explained that if employers succeed in helping people change their habits now, expensive treatments can be avoided later. 
Controlling other factors in the rise of healthcare costs presents a huge challenge.  The labor shortage has no quick solution.  A scarcity of workers increases costs by driving wages up and forcing a greater use of overtime.  Stella points out that these labor costs have more significance in the healthcare industry than in many other industries, because labor accounts for 60% or more of the costs of doing business. 

Drug costs alone have pushed up the cost of healthcare.  “America is absolutely in love with the pill,” said Stella.  The amount of prescriptions being written and the cost of the drugs themselves have both increased dramatically in the past ten years. 

Another factor that can contribute to increased costs involves the duplication of certain services within a community.  If highly expensive diagnostic equipment is available in two locations, but not fully utilized in either place, the charges for using this equipment may go up.  Carlstedt pointed out that studies have shown this to be the case in some communities. 

Whether this is the case in Bloomington is unclear.  Bloomington has become a regional center for healthcare and Bloomington hospital is one of the major employers in this area.  Additionally, several outpatient centers now offer services previously available only at the hospital.  Dr. Wesley Ratliff of Internal Medicine Associates promotes this trend.  He sees the outpatient centers as “providing more convenience for patients.”  He also pointed out that the centers can draw more people to Bloomington for healthcare, and some of these people might subsequently choose to use Bloomington Hospital when they need inpatient care. 

But as doctors become more involved in outpatient care, the role of the hospital will change.  Dr. Charles McKeen, general surgeon and chief of the medical staff at Bloomington Hospital,  noted that the competition between outpatient centers and the hospital will evolve.  “There may have to be an evolution of what this hospital is like in the future,” he said.  “We should not expect the hospital of the future to have everything it has had in the past.” 
Given all the difficulties discussed, it may be of little comfort to people to learn that Bloomington has relatively low healthcare costs.  “Bloomington is below the state of Indiana average, and then when you take Indiana and compare us to the other states, with the exception of Kentucky, we are the cheapest state to be in,” said Stella.  This can be a selling point in attempts to promote Indiana and Bloomington as places for businesses to locate.  Stella pointed to Japanese auto manufacturers as examples of companies that were drawn here in part due to lower healthcare costs.  “The Japanese haven’t come to Indiana to build their auto plants because Indiana is an expensive state,” said Stella. 

Healthcare concerns everyone and its problems will not solve themselves.  The point of the forum, Steve Howard explained, was to examine issues and to educate, not to find immediate answers.  “We feel that good solutions have their basis in good information,” he said at the beginning.  It will take many efforts by many people to find the solutions needed.  “America has still not decided what it wants to do about healthcare,” Ken Stella pointed out.  In the face of this difficulty, Nancy Carlstedt remains optimistic, however.  She stressed that “We have always risen to the occasion in healthcare and I think we’ll continue to do that.” 

The Facts about Group Health Insurance Rates: Why large companies do not always have an advantage 

It is commonly understood that prices get better as quantity increases.  “The general mentality of a consumer is typically, ‘The more we buy—the more the quantity, the bigger the discount,’ and certainly in a lot of durable goods that is true,” said Ron Remak, general agent of Bill C. Brown Associates. 

Health insurance is another matter, however.  “Truth be known, individual coverage often is the least expensive type of coverage, believe it or not,” Remak reported. The flip side of this is that individual coverage is underwritten more strictly.  A healthy person, with a good medical history could get premiums that are 15%-30% lower than group rates, according to Remak.  Another person with various health problems might be required to pay higher premiums, or have certain conditions excluded from coverage. 

The same pattern applies to small companies versus large companies.  Insurance companies manage risk.  They have to determine the expectation for costs of any group.  For a group of 30 or less, the insurers want to know as much as possible about individual health records.  In groups of 100 or more, Remak said, they take a more conservative approach to their rates.  They use general figures to balance the larger number of payments coming in with the increased likelihood of expensive treatments. 

Cheryl Terry, Benefits Specialist with The May Agency, agreed that group rates depend on factors other than the size of the company.  “If you have a healthy group that’s large, you’re probably looking at better rates,” she said, but the important factor here is health, not the size of the group. 

Some people have sought to become part of a larger group, with the hope of getting better rates.  For example, industry associations sometimes try getting group coverage for their members.  However, it may be to no avail.  “Most of my accounts that have tried to go into an association that related to their industry have found the rates to be higher,” Terry said. 

One thing to keep in mind is that the insurance companies incur significant administrative costs in addition to the cost of paying healthcare providers.  “Insurance companies want to make sure there is an employer–employee relationship, because if there’s no employer–employee relationship, they know that administratively, it’s going to be more expensive,” Remak said. 

One approach some large companies take is to self-insure.  Locally, Cook, Inc. has chosen this route.  Jim Gardner, President of Cook Family Health Center, explained that Cook still buys insurance to cover catastrophic claims, but all standard claims are handled internally.  This means that the company establishes its own premiums and defines its own benefits. 

While this gives them more control, they still have to confront the rising cost of healthcare.  “I don’t think our challenges are different from anybody else’s,” Gardner said.  “People want the best and the best is getting more and more expensive.” 

Despite all of the problems dealing with a process that is “way too complicated,” Gardner suggested another perspective.  He pointed out that there are two sides to the issue of rising healthcare costs.  “It’s an expense on one side and it’s also a benefit on the other,” Gardner said.  “People are living longer than they used to.  Maybe it’s worth the cost.” 

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