Tim Vandenack, Truth Staff
tvandenack@etruth.com
GOSHEN -- It'll be a nerve-wracking few days for some city officials from northern Indiana.
"I think there's a lot of anxiety and a little bit of nervousness over what's going to happen," said Mishawaka Mayor Jeff Rea.
Indiana lawmakers are in the final stages of crafting a property tax relief plan and one of the main elements they're mulling over calls for caps on the property taxes homeowners and other property owners pay.
The legislators aim to prevent spikes in taxpayers' bills from year to year. But Elkhart, Goshen and Mishawaka officials fear the caps would clobber them, hamstringing their ability to generate revenue.
That had them talking Tuesday about the possibility of layoffs, service cuts and new fees, and steeling themselves for the worst come Friday. That's when the legislative session ends and it's the latest any plan likely would be completed.
"Cities are just going to have to brace themselves for what that decision is going to be," said Goshen Mayor Allan Kauffman, speaking at a gathering of the Elkhart County-Cities Forum. "We're going to have to figure out where the cuts are going to be."
Rea, who's lobbied lawmakers in Indianapolis on behalf of cities and also addressed the Elkhart County body, has scheduled a meeting of Mishawaka city staffers for Tuesday to go over particulars of any plan. Elkhart Mayor Dick Moore, meanwhile, is planning for a dip of up to $3.3 million in property tax inflows by 2009, as per Indiana Department of Local Government Finance estimates based on the proposed caps.
"We're trying to prepare our city for the worst scenario," said Moore.
Legislators are considering numerous possible fixes to rein in property taxes. One of the key measures calls for a cap on homeowners' property taxes, a max of 1 percent on a home's assessed valuation, which would amount to $1,000 on a $100,000 home. The figure would be 2 percent for rental property and 3 percent for businesses.
Rea says the caps would result in a decline of $592 million to cities, towns, townships, school districts and counties across the state by 2010. Particularly hard hit would be urban locales, like South Bend-Mishawaka and Elkhart-Goshen.
The situation has him on the defensive, rejecting the reasoning behind the caps that cities are spendthrift and suggesting that the way local government pays for itself could be undergoing a metamorphosis. It's not that he opposes property tax reform, it's just that property taxes ought to be part of the revenue mix.
What lawmakers come up with "affects our operations forever, I think," Rea said. With caps, Mishawaka stands to lose $6.2 million in property tax inflows by 2010, about 27 percent of its property tax levy.
Kauffman doesn't see how police and fire services -- typically the largest element of a city's budget -- won't be adversely impacted in some locales. He's anticipating an initial dip of about $1.3 million in inflows, about 10 percent of Goshen's total property tax levy.
"...Some of the cuts in some of the cities are going to be way too deep not to affect public safety," Kauffman warned.
Increasing the local income tax has been broached as one possible means of helping cities offset property tax losses. But Kauffman wonders if the pending legislation allows for such hikes while Rea notes that income tax can be an unstable revenue source from year to year.
Through it all, many state leaders, including Gov. Mitch Daniels, have talked of the importance of reforming and streamlining local government to make it more efficient. Rea says that should've received more attention first, with debate over property tax reform waiting until next year.