tax

County Tax Board

Gov. Mitch Daniels' property tax plan gives even greater weight to the County Boards of Tax and Capital Projects Review that begin in 2009. Daniels called for the boards to trim budgets "as needed to keep our taxes down."

Who will be on those boards?

Under the law passed by this year's General Assembly, it varies depending on how many cities, towns and school corporations are in the county. In all but the Marion County, voters will elect two of the nine members.

In Allen County, the board will include the two elected members and:

• A county council member
• A Fort Wayne City Council member
• A member of the Fort Wayne Community Schools board
• The New Haven and Woodburn city councils will choose one of its members to represent both councils.
• The three other school districts will choose one member to represent the three, with the board being represented to alternate.
• The town boards of Allen County's four towns choose one of their members to represent all the towns.
• The county auditor.

Taxes and spending, county by county

The state Department of Local Government Finance has placed on its Web page an informative county-by-county analysis of local government tax rates and spending. Each county's link includes a pie chart showing the breakdown of the property tax burden between homes, commercial, industrial, agriculture and utilities; the 2007 property tax levy (total revenue) for 2006 and 2007; a chart showing the 10-year levy trend measured against inflation; and recent bond issues.

A news release from DLGF said:

These summaries are the first compilation of this information by county in Indiana.

“Hoosier taxpayers have never had this kind of property tax information available,” Commissioner Cheryl Musgrave said. “We are cutting through the confusion by providing taxpayers with information they need to understand their property taxes.”

More on the governor's plan

The governor's office has a Web page with several links to informative pdf files about the property tax plan, including:

• The text of his address.
• An audio file of the speech.
• A summary of the plan
• A Q&A
• A fact sheet on property taxes and spending
• A comparison of the plan vs. current law.
• Property tax facts and figures
• A chart showing estimated tax growth for principal homes
• A chart showing the growth in state wide levies.

The state Republican Party has a summary of reaction -- all of it positive, not surprisingly....

...while Democratic gubernatorial candidate Jill Long Thompson criticizes it.

The Indiana Association of Counties likes the state taking over school and welfare costs but is skeptical of putting the circuit breaker into the constitution. Download assoc_in_counties_release_102307.pdf

The Indianapolis Star notes that the governor's proposed 7 percent sales tax would place Indiana in a tie for the highest state sales tax. However, many cities in other states have local sales taxes that, when combined with the state tax, drive the total tax higher than 7 percent.

For more coverage, read this morning's stories in:

The Journal Gazette

The Associated Press (via the South Bend Tribune)

Evansville Courier and Press

Governor's property tax plan

Gov. Mitch Daniels unveiled a tax plan Tuesday evening that includes limiting property taxes on owner-occupied homes to 1 percent of the home's value -- a cap the governor would amend into the state constitution. He also called for the state to fully fund local school operating expenses, paying for it with a 1-cent increase in the sales tax; a 2 percent cap on rentals; and a 3 percent cap on property taxes paid by businesses.

Daniels considered eliminating property taxes but decided against it, largely because:

I could not support the large increase in personal income taxes, paid by every Hoosier worker and most small businesses, which would be necessary for total elimination.

The governor called for county tax boards to hold the line on spending and for voter referendums -- rather than dueling petitions -- on not only major construction projects financed with property tax revenue but also increases in tax rates for operating expenses "in excess of the growth in local income."

The cap places a high priority on accurate property assessments. The governor said:

Finally, our unfair and unfixable assessment system must go.  I will propose the elimination of all political assessors and the appointment by each County Council of a single, qualified and certified assessor to oversee trained professionals in conducting future appraisals. 

Late rebates

Counties are struggling to come up with the financial and staffing resources to get out the property tax rebate checks, and not all property owners should expect them by year's end, Niki Kelly reported Sunday:

David Bottorff, executive director of the Association of Indiana Counties, said it originally estimated it would cost about $1.35 per rebate check. But he said that number has jumped to as high as $2 a check, partly due to charges from software companies to reprogram the systems.

“It would have been much more efficient to put the money up front as a homestead credit,” he said.

But even that would have cost something.

Noble County Auditor Jackie Knafel said even if a credit was added to the fall property tax installment she would have had to reprint those bills. This is because many counties print one bill in the spring that shows the amount to be paid both installments.

“It would have been more costly to do that in the fall,” she said. “Just waiting until next year’s taxes would have been the cheapest option.” ...

... county auditors are supposed to certify rebate check amounts to the county treasurer by Dec. 20 so the treasurer can print and mail the checks.

But the usual November tax deadline is complicating that process.

For instance, Allen County’s fall tax due date is Nov. 13.

(Allen County Auditor Lisa) Blosser said the treasurer will need at least a month after that to post all the payments before county officials can begin checking for tax delinquencies, pushing Allen rebate checks possibly to March.

Chamber poll

The Indiana Chamber of Commerce released results of a statewide poll of registered voters regarding property taxes.

The key findings:

• Voters perceive there is a property tax crisis and they want action;
• Voters believe market value is the correct assessment standard, but the assessment system is broken;
• Voters misunderstand where property taxes are raised and spent;
• Voters are looking to the General Assembly and governor to solve property tax problems;
• Voters want government spending to be controlled and reduced versus adding more taxes of any kind to offset the spending; and
• Voters want local government to be overhauled

The complex nature of the state's property tax system was reflected in this from the Chamber:

Perhaps the most revealing finding is that a significant number of voters don’t realize that the property tax dollars collected actually go to fund local government budgets, with less than 1% designated for state government uses. When asked “where is most of the property tax revenue spent,” over one-third (37%) said schools, 20% tapped state government and 18% named various local government units (8% city/town, 7% county and 3% township). More than 20% said they didn’t know where their tax dollars went. Additionally, when asked, “what is causing property taxes to increase,” nearly half (46%) incorrectly said state government spending.

The full poll report can be found here.

One finding -- if it truly reflects widespread Hoosier opinion -- will not help counties decide whether to take advantage of the provisions of House Enrolled Act 1478 that allow them to move some of the tax burden from property to income taxes. The poll results show 44 percent oppose or strongly oppose adding a local income tax to replace a portion of the property tax; 40 percent favor or strongly favor; 16 percent are uncertain.

The case for doing nothing

At a time when elected officials and homeowners alike are shouting for property tax relief, one eminently knowledgeable expert on Indiana property taxes wonders if it's time to wait while all the other tax-relief steps play out.

Larry DeBoer, one of the state's few "honest brokers" in looking at property taxes -- he has no hidden political agenda -- asks in his most recent column,   

Is it possible that we've already solved our Indiana property tax problem, but we just don't know it yet?

He quickly adds,

I'm not sure that I believe it either.

But then he notes seven specific steps now underway to relieve property taxes.

1. The $300 million  2007 rebates and $250 million in relief appropriated for 2008.

2. The option pending before counties to move some current and future property tax revenues to income taxes.

3. The circuit breaker ceiling that takes effect in 2008.

4. Tougher standards for assessors that begin next year.

5. The reassessments ordered by the Department of Local Government Financing.

6. Trending

7. New county-level tax review boards that begin in 2009.

DeBoer concludes:

... maybe it's time to let it alone for a while. Many county officials would welcome a chance to catch up with all the policy changes. Once we've caught up, we may find that we're further along toward a solution to the property tax problem than we think.

Latest coverage

In Monday's meeting of the Commission on State Tax and Financing Policy, a GOP analyst laid out a scenario that would move financing all operating costs for schools to the state, but homeowners would lose  homestead and property tax replacement credits As The Journal Gazette's Niki Kelly explains:

Senate Republican fiscal analyst Dan Novreske outlined one proposal to members of the Commission on State Tax and Financing Policy on Monday but stressed it was not a recommendation.

The plan would take the $2 billion a year the state pays in property-tax relief credits and homestead credits and use the money to take over the remaining portion of the school general fund and various welfare levies.

The exchange is not dollar-for-dollar, though, and state lawmakers would have to find an additional $471 million to make the initial swap, as well as ongoing money every year for growth in those programs.

Currently, the state pays for 85 percent of the school general fund while the entire cost of the welfare levies is paid for with property taxes. Eliminating these property-tax levies means they can never grow in the future.

Legislators on the panel did not seem enthused about the prospect, though. ...

Sen. Robert Meeks, R-LaGrange, pointed out that property-tax bills will still rise because the proposal makes no changes to the local spending authority of townships, cities, towns, libraries or capital expenditures for schools.

Kenley also on Monday put to rest any rumors that legislators would attempt substantive property tax changes on Organization Day in November. That is the ceremonial first gathering of the General Assembly to swear in new members.

On Sunday, Kelly explained how property tax sales work:

There are no statewide statistics on tax sales – the auction of homes, businesses, vacant lands or other property because of delinquent property taxes. And a property is eligible for the sale if the owner is behind on other payments, such as sewer-use charges, weed fees, neighborhood code order fees or a special assessment.

The best data available are from SRI Inc., a private vendor that handles tax sales for about 70 Indiana counties.

According to its information, 4,674 parcels were sold at tax sales in Indiana in 2005.

SRI does not handle some of Indiana’s largest counties, though, such as Allen and Marion.

Allen County Auditor Lisa Blosser said Allen County sold 943 properties in 2005, bringing in more than $15 million.

In all, Indiana has about 3 million parcels of land.

“It’s one process I really hate in my office,” Blosser said. “You never want to take someone’s property.”

In Allen County, GM remains the top property tax payer:

General Motors continues to be the biggest contributor to Allen County tax rolls, but new methods in calculating the value of property have added a few new entities to the county’s list of top taxpayers.

The top property taxpayers in the county contributed 7.9 percent of the $348 million in property taxes that will be collected this year, said Renata Renninger, property tax administrator with the Allen County Auditor’s office.

They are GM, three utilities, two hospitals and several commercial developments. But a few properties moved into the top 10 this year. The change, in part, is because of trending – the updating of property values each year based on the sale of similar properties.

Edward Rose Development, which owns several apartment complexes in the county, was eighth on the list with a property tax bill of $1.4 million. An increase in those properties’ assessed value was because of trending, Auditor Lisa Blosser said.

Marion County took advantages of changes in House Enrolled Act 1478 that allows counties to raise income taxes for public safety expenditures. Beginning Monday, the Indianapolis Star reported, wage earners started paying it.

For a Marion County resident who earned the median income of $41,947 last year, the tax means an extra $273 siphoned from paychecks over the course of a year.

The tax affects only those who live in Marion County. It had been 1 percent and was raised to 1.65 percent to pay for Mayor Bart Peterson's public safety improvement plan.

The new revenue will be used to hire 100 new police officers, pay for raises and past pension obligations, and continue court system improvements that stopped the early release of criminals from crowded jails.

State law required that the tax be in place by Oct. 1 so the state could collect and distribute the revenue during next year's budget.

Property tax flow chart, guide

The Indiana County Treasurers’ Association, the Indiana County Auditors’ Association and the Indiana County Assessors’ Association have developed this Download property_tax_flow_chart_92007.pdf showing which officials make which decisions about property assessment and taxes.

In releasing the chart, the groups issued this statement:

Often, the people who have little to do with spending property tax dollars receive the most phone calls about why property taxes have increased.  To the defense of county administrative offices such as auditors, treasurers and assessors, they administer the property tax system.  Since they have the word “county” in their title, citizens often believe property taxes only go the county.  Although property tax administration happens at the courthouse, the money is spent by political units throughout the county, such as schools, cities, towns, townships, libraries and the county. 

The state Department of Local Government Finance, meanwhile, has released its own guide to help Hoosiers understand property taxes. The guide has links to DLGF pages that show county-by-county tax rates for each local government unit; plus tax levies for all units. The pages allow property owners to compare rates.

Catching up

The Department of Local Government Finance announced updates on the reassessment quality of 14 counties Friday -- including some of the state's tiniest. Problematic assessments of industrial and commercial properties spurred hearings in seven counties.

Still no word on Allen, the state's second-largest county.

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A new property tax proposal:

State Rep. David Orentlicher, D-Indianapolis, said Sunday that his plan to cut property taxes by $2.3 billion would give renters and homeowners some relief next spring while lawmakers work on long-term strategies for government reform. ...

Under Orentlicher's plan, about $1.6 billion in property taxes would be shifted to state sales and income taxes, which he said would have to be increased by 1 percentage point each: The income tax would grow from 3.4 percent to 4.4 percent, and the sales tax from 6 percent to 7 percent.

Another $300 million would come from increased business taxes, and $400 million in local expenses would be transferred to the state. Orentlicher said the state could cover that amount with its surplus and money from casino licensing fees.

*   *   *   *

Meanwhile, a story in the Indy Star on Sunday about the costs of local schools borrowing to compensate for late and lower-than-expected property tax revenues.

Recent borrowing through the Indiana Bond Bank, an agency created by the Indiana General Assembly that helps municipal agencies with financial issues, tells the story. In June 2006, schools lined up to borrow $40.8 million. This June, schools borrowed $236.4 million. ...

In some counties, including Marion County, the state has ordered property tax bills frozen at the 2006 level until a reassessment is completed. In other counties, property tax bills went out later than usual because of delays in completing the property reassessments.

In either case, schools, which often plan their budgets 18 months in advance, faced the opening of a new school year short of cash.

Indianapolis Public Schools, for example, was anticipating receiving about $211 million in property taxes in 2007. Because of the state's order, IPS expects to receive about $175 million, or the amount it received last year, said Rodney Black, the school district's business manager.

Black said the district could end up paying $1 million in interest on money it wasn't expecting to borrow.

-- Tracy Warner