Evansville Courier & Press staff and wire reports
INDIANAPOLIS - Mayors from across Indiana converged on the Statehouse on Wednesday, urging lawmakers to provide them with more ways of generating tax money so they can meet essential services, such as police and fire protection.
The lobbying effort comes as state lawmakers are being pressured by homeowners, who are bracing for property-tax increases averaging 15 percent next year.
A group of big-city and small-town mayors warned if the Legislature does not act this session to replace property-tax revenue cities are losing to the so-called Circuit Breaker law, some communities will face severe cuts in public safety.
Among the mayors lobbying legislators Wednesday was Mayor Jonathan Weinzapfel. "Everybody wants to see property taxes lowered; but you can't do that unless you're going to provide replacement revenue," Weinzapfel said outside the Statehouse.
"Cities and towns each have their own unique challenges, opportunities and problems. We need the fiscal flexibility to address those conditions, to provide the type of services our constituents want us to provide," he said.
Indianapolis Mayor Bart Peterson said state law does not provide local governments with ways to raise enough money. "We don't do fancy things in local government, we just do the basics, and we don't have enough money to do the basics."
Peterson said Indianapolis faces an $85 million funding gap. That comes as the Moody's Investor's Service this week downgraded Indianapolis' bond rating. "I'm not asking the state Legislature for a bailout; I'm asking the Legislature to help us help ourselves," Peterson said, flanked by other mayors and rows of uniformed police officers and firefighters.
Last year, state legislators passed the so-called Circuit Breaker law that takes effect for homeowners for property taxes payable in 2008. It limits the amount of property tax an owner can be assessed to 2 percent of its value. But many municipal government officials have blasted the law as severely constricting a local government pipeline without providing alternative revenue streams.
The effect of the 2 percent residential circuit breaker on Evansville city budget remains to be seen, Weinzapfel said. "Looking at it initially, in a static situation, we estimate there would be a potential impact of $1.2 million (of less revenue) next year," Weinzapfel said. The mayor noted that an increase in assessed valuations of properties may offset some of that loss. "We haven't been through that analysis," he said.
Of even greater concern, he said, is the 2010 circuit breaker on industrial and commercial properties. Weinzapfel said its impact on the city's revenue is estimated about $6.5 million. "In 2010, we obviously don't have the reserves to cover a $6 million hit. That would be devastating," he said.
Even a shortfall of $1 million, for example, could force difficult choices.
"Property taxes are used to fund wages, salaries and benefits; so we would have to look at personnel. The greatest segment of workers is public safety: police and fire," Weinzapfel said. "Obviously, that's the last place I would want to make any type of personnel cuts. But in the situation we're looking at, a million-dollar cut in our budget, we may not have a choice."
The lobby for municipal officials, the Indiana Association of Cities and Towns, this year had urged legislators to pass a reform package called "Hometown Matters" that would have included alternatives to property tax funding. Some elements of that proposal remain alive in the session, but the full package did not advance.
Rep. Suzanne Crouch, R-Evansville, said legislators want to make sure cities, towns, townships and libraries are able to provide services taxpayers expect.
"But I think it's important that we protect the taxpayers from excessive or unreasonable property taxes. That's why that 2 percent circuit breaker was put into place, and that is why the Legislature continues to look at measures to put immediate property tax relief and still provide adequate funding for the taxing unit," she said.
"But you have to balance the wants and needs of the taxing units versus the protection of the taxpayer. So there has to be a balance between the two."
One issue in the Legislature's final days is whether to allow local governments to implement other types of taxes if not all new revenue would go toward property tax relief.
"I don't view the resistance so much as allowing the locals to have options, as to still protecting the taxpayers, ultimately," Crouch said. "Because if we're just substituting one tax for another tax without providing any property tax relief in return, then we really aren't protecting the taxpayers."
A variety of factors are expected to cause significant property tax increases this year, so lawmakers want to provide some immediate relief.
General consensus appears to exist on providing an increase in homestead credits to at least soften the blow on homeowners in 2007. But lawmakers also want to reduce reliance on property taxes in the long term, believing the system is antiquated and in many cases no longer a sound reflection of wealth.
State lawmakers Wednesday began negotiations on property tax relief and restructuring before an April 29 deadline for the Legislature to adjourn.
Members of a conference committee hope they can mesh elements of three proposals - one by Democrats who control the House, one by Republicans who rule the Senate, and a plan by Rep. Jeff Espich of Uniondale, the fiscal leader for House Republicans.
The Senate Republican plan would largely end the state's practice of subsidizing local property taxes. It would use what is now about $2 billion a year in annual relief payments to help pay for all school operating and juvenile detention costs and half of future cost increases for child welfare services.
The House Democrats' plan and Espich's proposal also would allow local governments to raise local income taxes in lieu of property tax increases, and if they did, they would get some additional new money to spend.