The issue
Gov. Daniels' relief plan would force counties to hold annual property tax increases to the average growth of personal income within the county. The cap would be 2.9 percent in Lake County and 4.6 percent in Porter County. Property tax spending increased 9.2 percent this year in Lake County and 5.2 percent in Porter County.
INDIANAPOLIS | Gov. Mitch Daniels' push to rein in property taxes contains a plethora of moving parts, but the glue holding it all together is tighter control of local spending.
"Any plan that makes a real difference in property taxation will have to go to its root cause, and that is excessive spending," Daniels said in his speech announcing the plan. "Total local spending on school construction, libraries, fire departments and all other local services simply cannot keep rising faster than Hoosier incomes."
What that means depends on where you live. The amount local governments could grow their budgets each year would be tied to the average increase in personal income each county experienced the previous six years.
Porter County, among the state's leaders in income growth, would be allowed to boost spending 4.6 percent a year, meaning cities, libraries, schools and other taxing units would face only minor belt tightening.
But Lake County would be one of nearly two-dozen counties that would be forced to hold annual spending hikes below 3 percent and would have to go on a crash diet.
The Lake County Council's failure to adopt an income tax mandate from the Legislature means most property tax budgets in Lake will remain stagnant next year. But that certainly wasn't the case this year.
Lake County tax hikes triple proposed cap
Total property tax spending in Lake, which encompasses cities, county government, libraries, sanitary districts, schools and townships, grew $82 million from 2006 to 2007, a one-year jump of 9.2 percent. The increase allowed under Daniels' plan would've been only $26 million, or 2.9 percent.
East Chicago, Crown Point, Dyer, Lake Station, Munster, and St. John all increased property-tax draws by double digits this year, as did eight school corporations, three library districts and seven other taxing units in Lake. County government's property-tax budget grew 6 percent.
Though it will be tight, Lake County Councilman Larry Blanchard, R-Crown Point, believes the county can live with the plan.
"We should be able to live with that no problem. We're living with zero now," said Blanchard, referring to a freeze on county spending because of Lake's failure to adopt the state-mandated income tax.
In Porter County, total property tax spending increased 5.2 percent this year, or about $1.2 million more than would have been allowed under Daniels' proposed cap.
"I have no problems with the governor's plan," said Valparaiso Mayor Jon Costas. "I think it's an excellent plan."
Costas said Valparaiso typically holds annual property tax hikes below 4 percent, but the city sought an 11.5-percent increase this year to meet increased service demands brought on by annexation.
Current law allows local governments to seek budget increases to cover annexations, tax collection shortfalls and other unique circumstances, such as Lake County's pending absorption of the Hammond Health Department.
Daniels' plan would do away with that, instead forcing local governments to compete for limited resources.
Adding it all up
Beginning in 2009, a nine-member control board would play referee in each county. If Valparaiso, for instance, needed a big budget hike to cover an annexation, the control board might order Portage or Chesterton to trim expenses. Similar scenarios would play out in Lake County.
Only voters could approve spending increases beyond the county-wide cap. Daniels' plan also calls for referendums to decide the fate of large-scale construction projects, which the governor calls the single-biggest force behind higher property taxes. Capital projects currently are vetted by a petition and remonstrance system that pits opponents and supporters against each other in a contest won by whichever side gathers more signatures.
The impact of the other key spending control in Daniels' plan remains unclear. The governor wants to cap homeowner tax bills at 1 percent of assessed value, or $1,000 on a $100,000 home. The cap would be 2 percent for rental properties and 3 percent for businesses.
These so-called circuit breakers work by slicing into local budgets. Less stringent caps already on the books are expected to sap $100 million from local governments when they take full effect in 2010, with Lake County alone losing $78.6 million.
Times staff writer Krystin E. Kasak contributed to this report.
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