Knox County Commissioners add cumulative capital development fund to the books

The resolution stated, in part, that the CCD fund will be financed by “a property tax rate of $0.0333 on each $100 of taxable real and personal property” beginning in this year and payable in 2018.

The rate will continue until it's either reduced or rescinded.

Only property owners would be affected; if those property owners have already reached the state-mandated property tax caps, they would not be paying more.

The CCD fund has been a topic of discussion in county government stretching back to last year. At issue is a 2016 change in state law and how it has been interpreted by the state Department of Local Government Finance.

Local officials have said that the department's interpretation of a statute has changed, that they were not notified of the change, and that the agency used a different formula to figure out the county's budget, resulting in a roughly $300,000 cut to the 2017 levy.

After the county's appeal, local officials were told the only way to receive the money was to establish a CCD fund.

A CCD fund is something that has to be specifically established, according to Jenny Banks, director of communications for the DLGF through a public hearing and “remonstrance process,” which, for 2017, had to have been completed by August 2016.

Knox County, however, never went through that process to establish the fund.

“Since the county does not have the fund, it does not have the ability to impose property taxes for this fund in 2017, which is why the department is not providing the levy adjustment," Banks said in an emailed statement in February.

The DLGF did confirm, however, that Knox County was among a handful of counties that have in the past received the levy adjustment despite the fact that they didn't have a CCD fund.

From here on out, Banks said, that won't be the case.

The need to establish the fund in order to restore that $300,000 is what led to Thursday's public hearing and special meeting.

“We've worked with the state and the legislature recognizes the problem,” said Ben Roeger, a licensed CPA who serves as the county's financial consultant and is employed C.L. Coonrod & Company out of Indianapolis. “They've allowed us to get that loss back next year as part of the budget, but moving forward, if we want to continue to have this maximum levy, we need to establish a CCD fund so we can maintain our current cash flow.”

For reference, Roeger added, if a home was valued at $90,000, the effect of the tax from the CCD fund would be about $4.

Streeter noted during the hearing that she wanted to be sure to clarify whether the tax resulting from the CCD fund was a “new” tax or not. Roeger explained that it's a new fund and a new rate, but it's to recoup funds that had routinely been collected in past years.

“The only thing we're doing is we're taking money and putting it in two pots instead of one,” council president Bob Lechner said Friday afternoon. “Just like a household might do, we're putting the 'rent money' in one cookie jar and the 'utility money' in another jar.”

Several property owners spoke up during the public hearing to express both frustration and confusion around the CCD fund.

Tom Yochum, a member of the Area Plan Commission, questioned why another tax was needed to recoup more funds for the county when other funds such as the County Option Income Tax, Economic Development Income Tax and rainy day were well-funded for now.

Plus, he said, property owners have continued over the years to pay more in taxes.

“I, as a taxpayer, am concerned about why we need more tax money when we've got money sitting out here that we can use – and we've been getting by all along,” Yochum said. “Why another tax?”

“It's not another tax,” Lechner said. “It is going to replace exactly what was in the General Fund before. All this does is recoup the $300,000 that was lost because the DLGF misinterpreted what they'd been doing before.”

There was also some confusion regarding what exactly the money in the CCD fund would be used for. Roeger said that it could be put toward capital projects such as improvements to the courthouse, sidewalks, or purchasing new computer software.

Lechner noted that elected officials would review the uses for the money in the CCD fund, as outlined by state statute, to ensure everyone knows exactly what it can be used for.

After the resolution establishing the CCD fund was read aloud during the subsequent special commissioners' meeting, Ellerman also questioned the need for the fund. The rainy day fund's year-to-date balance is over $3 million, he said, and with that much money saved up, he didn't see the need to impose another tax in order to recoup just $300,000.

“I don't feel like we need the money and I don't feel like we ought to increase the taxes,” he said. “I just don't think taxpayers are going to suffer if we don't get this tax.”

But Hinkle recalled a county council meeting last year when H.J. Umbaugh & Associations out of Indianapolis presented fiscal projections and told officials that much of the rainy day fund would be eaten up by budget expenditures over the next several years.

And indeed, the balanced 2017 budget that the council passed in September reflected how much of an impact the property tax caps are having on local governments. Those circuit breakers cost the county roughly $900,000, leaving officials to rely on COIT dollars to fund operations.

Lechner also later explained that the COIT and EDIT distributions the county receives would be penalized if the fund wasn't adopted.