INDIANAPOLIS | While it's too soon for officials to say just what region property tax bills will look like, early evidence suggests Northwest Indiana has much in common with areas where homeowners are taking it on the chin.
State analysts this spring warned homeowners to brace for an average tax hike of 24 percent. But Indiana leaders have been blindsided this month by residential bills up more than 35 percent in Indianapolis and other pockets of the state.
Northwest Indiana remains in the dark, with Lake and Porter counties still months away from mailing bills.
Not far down the road in Elkhart County, homeowners had until last Friday to begin paying tax bills 29 percent larger than that last year.
Purdue University economist Larry DeBoer, whom many elected officials consider the foremost expert on Indiana property taxes, says Lake County, if not the entire region, could face residential bills of similar proportion.
"Not to raise any red flags," DeBoer said. "But just looking in advance at the sorts of things that affect taxes, one would guess that Lake homeowners might experience a bigger increase than most places."
Three main factors are at play in the higher bill, including the state's shift to trending, a new assessment system linking property values to the real estate market. This also is the first year counties must make up millions in revenue lost through the state's elimination of the property tax on business inventories.
Elkhart County Auditor David Hess says the loss of inventory tax cut his county's tax base 9 percent. State officials estimate the change took $23 million in taxes that had been paid by businesses and spread that burden among all Elkhart County taxpayers, including homeowners.
"Initially, we had our share of irate taxpayers who were just mad," Hess said. "Some you can explain things to."
Porter County officials say the inventory tax elimination shaved about 4 percent off their tax base, which projects a roughly $7 million shift from businesses to all taxpayers. The best estimate is $24 million for Lake County.
"One fundamental difference, though, that I would point out is that since the mid '70s (Elkhart County) has had a 1 percent county adjusted gross income tax to help buffer some of this," Hess said. "And, at this point, Lake County doesn't have one."
Marion County lost $79.9 million in business taxes with this year's elimination of the inventory tax. But state officials largely blame the huge homeowner tax hikes there on a failure by local assessors to update the value of commercial and industrial properties.
Because this is the first year for trending, all property values across the state are being updated from 1999 -- base year for the last reassessment -- to 2005 levels. But while homes, apartment buildings and other real estate are experiencing a six-year uptick, property taxes on business equipment and machinery already had been updated annually.
"If there's a lot of business equipment in a county, that makes for a bigger shift (to residential bills)." DeBoer said. "(There's) a lot of business equipment in Lake County."
The third and final factor, one that applies equally to all counties, is the state's 2005 decision to cap the funding it sends local governments. These property tax replacement credits had grown every year along with state sales tax collections.
But the state assistance has been capped at roughly $2 billion, reducing the size of homestead credits to owner-occupied homes from 20 percent to 18 percent. To offset the dwindling support, lawmakers temporarily increased another homeowner tax break, the homestead deduction, from $35,000 to $45,000.
"This is a tax break, but it's the kind of tax break homeowners won't notice," DeBoer said. "What it means is your taxes will go up less than they would have gone up, which is small comfort."
Lake County is closer to being able to mail tax bills than Porter County, which has yet to ship some of its assessment work downstate. Lake County Auditor Peggy Holinga Katona said she expects data back from the state as soon as this week. That would allow her office to begin crunching tax rates, but it still would take until at least September to get bills out the door.
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