Income tax hike will pay for new $8 million Community Correction center near Auburn

The cities and towns could receive additional revenue from the tax increase — unless they agree to let it be used for the Community Correction center.

The county currently collects an income tax rate for economic development of 0.25 percent — or 25 cents per $100 of income.

If the county pays for the Community Correction center by itself, the economic development tax rate would increase to 0.438 percent.

If all communities contribute their extra revenue to the project, the new rate would be 0.354 percent. Contributions by only some of the communities could put the rate in between the two figures.

The county’s overall income tax rate of 2 percent would increase as little as 0.104 percent or as much as 0.188 percent.

Financial consultant Jeff Peters laid out the numbers at a DeKalb County Council meeting Monday in the courthouse at Auburn.

“If we get the assistance from the towns, it will knock down the amount we have to raise the income tax,” said council President Alan Middleton. If not, he said, “There was never an issue about it being a deal-breaker for the project.”

Peters said the council needs a decision on the rate before its March 5 meeting to stay on schedule with the project.

The county plans to borrow $6.7 million for the project through a bond issue that would be paid back over 10 years by the income tax increase. Plans call for selling the bonds in early May.

“You still have, pretty much, historically low interest rates” that will help keep the bond payments low, Peters said.

Monday, the council voted on first reading to increase the income tax rate, issue bonds to pay for the project and spend the bond money on the project. The tax increase would take effect Oct. 1.

All three votes went 4-2 in favor of the tax increase and bonds. Council members Middleton, Rick Ring, LaDonna King and Martha Grimm voted in favor, with William VanWye and Dave Yarde voting “no.” Councilman Bob Krafft was not present.

VanWye expressed discomfort at voting for an uncertain tax rate.

Second and final votes on all three issues are expected at the council’s March 5 meeting, when the size of the tax increase should be known.

The total cost of the Community Correction center is estimated at $8 million. The county is using $1.3 million of previously collected economic development income tax funds to reduce the amount the county needs to borrow.

Plans call for building the center on the site of the county farm, along C.R. 40 west of Auburn. The price includes a new road connecting the center to S.R. 8, one mile to the south of the site.

County commissioners signed a contract Monday with Engineering Resources Inc. of Fort Wayne to design the road and oversee its construction for $170,000.