Daniels to Gary: Don't expect state bailout

Gov. Mitch Daniels said there is little the state can do to help Gary survive a $13 million cash shortfall this year, and he said any city asking for relief for 2009 should come to the state with "clean hands."

Whether the city of Gary has scrubbed sufficiently will be up to members of the state's newly created distressed unit appeal board, the governor said.

"Their job will be to say 'No,' until whoever's appealing for special treatment proves they've done everything they can do for themselves," Daniels said.

The governor made his comments while visiting with members of the Post-Tribune's editorial board Tuesday.

Gary Mayor Rudy Clay has implemented a 32-hour work week at City Hall, warning the city will run out of money by Oct. 1 unless drastic action is taken.

Gary Firefighters Local 359 President Raynard Robinson said just 24 firefighters were keeping watch over the cash-strapped city Tuesday, and just six of Gary's 13 fire stations were open.

According to the city's contract with the union, 71 firefighters should be working at any given time.

"If we get a major fire, we would not be able to handle it," Robinson said.

Fire Chief Jeff Ward put the blame squarely on the shoulders of the firefighters union, though, which blocked Ward's attempt to reduce manpower on city fire engines last week.

"The union took us to court," Ward said Tuesday. "If anything happens, it's on Local 359."

City controller Celita Green has blamed Gary's budget shortfall on uncollected property taxes and assessment errors.

Green also points to the Lake County Council's failure to pass a local income tax last year. The state froze every tax levy in Lake County as a result.

Daniels defended that decision Tuesday. He pointed to skyrocketing property tax bills in Lake County, the only county in Indiana that doesn't have an income tax.

"I'll be glad when the county officials get their act together," Daniels said.

The governor also said he'd be willing to listen to proposals to put more of the local tax burden on large corporations like U.S. Steel.

State lawmakers gave tax breaks to major Lake County industries in 2003.

Meanwhile, U.S. Steel announced last month its second-quarter net income had doubled this year from last.

However, Daniels said a return to previous taxing levels for major industry wouldn't be acceptable.

"Those facilities were the most highly taxed anywhere in the world of steel," Daniels said.

Finally, the governor said the state probably can't intervene in a dispute between Gary City Hall and Majestic Star Casino owner Don Barden, who is withholding $6 million from the city.

However, Daniels said he was unfamiliar with the details of that case, and he began taking notes when the topic came up.

"Now I'm curious," Daniels said.

Barden sued the city in February, claiming Gary breached a local development agreement when it didn't build an access road from Cline Avenue into his casino property.

The casino mogul announced he would withhold his monthly payments to the city, totaling about $6 million annually, and place the money in an escrow account until the matter is settled.

If it isn't settled soon, that case could exacerbate Gary's budget situation in 2009.

Property tax laws passed this year are expected to slash its budget by a third.

Those laws also created the state's distressed unit appeal board.

Clay and Green are preparing to make a case to that board before the end of the year, but a spokeswoman for the Indiana Association of Cities and Towns said several appointments have yet to be made.

Daniels said those members will be chosen in time for Gary to make its case, and he recognized that no other Indiana city will be hit as hard by the state's new tax laws.

"Gary's the extreme example of the entire state, no question," Daniels said.