Laurie Wink, The News-Dispatch
LA PORTE - Nexus Group consultants and county assessor's office employees shared their view of Indiana's property tax process on Wednesday, including an overview of the annual trending process that appears to have caused fear and loathing among local residents.
They explained that Indiana's property tax bills are based on a simple formula:
Base (net assessed value) x Tax Rate = Levy (county spending).
The formula identifies the three primary components that determine individual property owner's tax bills.
County spending - called the levy - drives the formula, explains Jeff Wuensch, Nexus Group chief operating officer. Each taxing unit in the county estimates the amount of revenue it needs to operate and the Indiana Department of Local Government Finance calculates the total levy.
The county assessor oversees county-wide property assessments that are based on two things: a large book of guidelines on how to determine the base assessment, and a 40-page manual specifying how to arrive at the current market value of a parcel. Some of the Nexus Group staff helped develop assessment guidelines while they were employed by the Indiana State Board of Tax Commissioners (now known as the Department of Local Government Finance).
Gross property assessments are rolled over to the county auditor, who deducts homestead credits and other exemptions to arrive at each property's net assessed value.
The county-wide assessment and levy data is sent to the DLGF, where the county's tax rate is determined by dividing the amount needed by the amount of assessed value to determine the rate at which each property owner should be taxed to provide sufficient funding for the county.
The formula is pretty straightforward. But the devil, as they say, is in the details. A pie chart developed by Purdue University economics professor Larry DeBoer identifies the underlying causes of a shift in the tax burden to homeowners for 2006 taxes payable this year.
According to DeBoer, 60 percent of the responsibility for higher 2006 property taxes are the result of state and local government policy decisions such as:
• The Legislature eliminated business inventory taxes that have to be made up with increased property taxes.
• The Legislature reduced homestead credits from 28 percent to 20 percent.
• The Legislature reduced the annual Property Tax Replacement Credit given to local governments to offset property tax increases.
• Increased local spending for personnel and operational costs.
The other 40 percent of the shift in the property tax burden to homeowners is the result of the state's move to annual trending. Starting with the 2007 tax year, annual trending will incrementally adjust property assessments based on current market values.
But for 2006 tax bills, payable in 2007, assessments were based on market value increases over a six year period, from 1999 to January 2005. The result has been "sticker shock," says Brian Bucher, Nexus vice president for software development. Rather than phasing in trending over a period of years, the General Assembly and DLGF decided to totally jump into the water in the first year of trending.
"The first year of annual trending, we're adding six years of data," Bucher said.
The first wave of sticker shock hit Indiana property owners in 2002, when the Supreme Court ruled in favor of an Indiana homeowner and required the state to move from "true tax value" to market-based assessments. As a result, many Indiana homeowners faced higher bills based on market values in 2002, instead of the 1995 assessments used for true tax values.
At that time, according to Wuensch, LaPorte County's reassessments were done by township assessors, trustee assessors and two vendors hired by the county. The Department of Local Government and Finance approved the new assessments, but "red flagged" some residential values in Michigan Township.
A review of assessments of the 220 industrial parcels in Michigan Township was completed in August. Nexus President Frank Kelly said the Michigan Township assessor, Terry Beckinger, left most of those assessments the same as they were in 2002-03. But new sales information indicated some of the assessments could be excessive.
In 2006, Nexus did a field review of one-third of the commercial and industrial parcels in the county. By the end of this year, the remaining 65 percent of commercial and industrial parcels will have been visited and reassessed.
Kelly said the DLGF has reviewed the 2006 La Porte County assessments and determined they are within the state guidelines.
Wuensch said that, to date, about 265 appeals have been filed for parcels in La Porte County, which has a total of 65,000 parcels. Some 225 of the appeals are in Michigan Township, and involve multi-million dollar residential properties as well as Blue Chip Casino and Lighthouse Place Premium Outlets, the county's two largest commercial properties.
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