The property tax rate for Vanderburgh County taxpayers outside the city limits would increase by almost 28 cents per $100 of net assessed value under what city-county consolidation planners are calling a baseline scenario.
City taxpayers' tax rate would decrease by almost 13 cents under the scenario, which planners call a theoretical exercise and not a likely turn of events.
The owner of a $100,000 owner-occupied home outside the city would pay about $84 annually above current taxes, while the owner of a $100,000 owner-occupied home in the city would pay $42 less.
"(The baseline scenario is) just another way that this can be done, depending on the budget, assessed value and other income (to a consolidated government)," said Ed Hafer Jr., chairman of the Evansville-Vanderburgh County Reorganization Committee's finance and tax subcommittee.
No one should assume the baseline scenario represents a likely outcome, said Tom Guevara, project manager for Indianapolis-based public accounting and consulting firm Crowe Horwath.
"It's just a basic, pure consolidation of offices and services between the two (taxing districts) unless there's a rationale for keeping them distinctly separate," he said. "It's if you were simply saying, 'We're going to meld these two (local governments) together without regard to looking at specific cost savings and/or methods of financing.'"
"We're probably talking three or four years before reorganization could be enacted. Who knows what a (consolidated government's) budget and taxes could look like?"
Calculated using 2010 budgeted expenditures for city and county government, the baseline scenario involves a reallocation of current city expenses and tax levy and the tax rates that fund them from city taxpayers to all taxpayers.
It includes a general services taxing district that would encompass all of Vanderburgh County. An urban services district would mirror the city's boundaries.
Property taxes would fund the costs of nonfee-based current city services that would be provided to all residents in the general services taxing district.
The resulting spreading of the burden of paying for local government over a larger assessed value base would be the key contributor to a net decrease in city residents' overall tax rate.
Tax-funded services that would be available only to residents of the urban district, primarily those provided by the Evansville Fire Department and Metropolitan Evansville Transit System, would be paid for only by that district's taxpayers.
Baseline scenario
Guevara said the baseline scenario takes into account specific functions of current city government that would be part of a single consolidated government.
County-only taxpayers who had not been paying for those services would pay for — and receive — them.
"There are certain city departments that become part of the general services district because they're part of general administrative services — for example, we can look at the (city) controller's office, legal department, mayor's office," said Guevara, whose firm is financial adviser to the reorganization committee.
City taxpayers now pay tax rates that support the Vanderburgh County Sheriff's Office while county-only taxpayers pay nothing to fund the Evansville Police Department. But in a consolidated government, the baseline scenario allocates all tax rates supporting the 2010 budgeted expenses of both departments — and the county jail — to all taxpayers.
At $29.4 million, the Police Department's budget accounts for slightly more than 39 percent of the city's $74.9 million General Fund budget.
The baseline scenario does not project tax rates for Sheriff Eric Williams' proposal to consolidate city and county law enforcement into a single agency under the sheriff's direction — or for Police Chief Brad Hill's proposal that his department assume all law enforcement duties if consolidation comes. Hill's plan would not merge the Police Department and the Vanderburgh Sheriff's Office.
Also factored into the baseline scenario is a provision of the 2006 legislation creating a framework for local governments to merge. It says debt obligations incurred by a political subdivision — the city or the county — before consolidation may not be imposed on property taxpayers who were not previously responsible for the indebtedness.
Likewise, pension obligations existing on the effective date of consolidation "must be paid by the taxpayers that were responsible for payment of the pension obligations before the reorganization."
Step by step
To reach its conclusions, Crowe Horwath performed a series of calculations that led to theoretical new tax rates for the general and urban services districts.
Sorting through 2010 budgeted expenditures of current city and county departments, the firm recategorized them in the two taxing districts.
Expenditures by city-specific departments were categorized in the urban services district, for which expenditures were calculated to be more than $63.8 million. Combined service provision expenditures allocated to the general services district amounted to more than $135.8 million.
Adding to the general and urban services districts existing outstanding property tax-funded bond issues, or debt obligations, Crowe Horwath recalculated expenditures allocated to the two taxing districts at $139.5 million and $64.7 million, respectively. The figures did not exceed combined city and county 2010 budgeted expenditures.
From there Crowe Horwath reallocated anticipated 2010 miscellaneous revenue — such as riverboat money, fees, grants and interest income — as part of its analysis of revenue available to fund expenditures in each of the theoretical taxing districts.
Some current city revenue streams were associated with several departments and funds that the baseline scenario includes in both the general and urban services taxing districts.
"These revenues have been allocated proportionately based on the portion of the city's 2010 budget that has been allocated to the general services district and the portion of the budget that has been allocated to the full urban services district," states Crowe Horwath's financial analysis report to the reorganization committee.
Final steps
Computing property tax levies involves subtracting estimated miscellaneous revenue for the taxing districts from estimated expenditures.
Subtracting the general services district's $72.2 million in miscellaneous revenue from the district's $139.5 million in expenditures produced a property tax levy of $67.2 million. The urban services district's $64.7 million in estimated expenditures minus its nearly $34 million in estimated miscellaneous revenue yielded a $30.7 million property tax levy.
The next calculation — estimated new tax rates for the general and urban services taxing districts — was performed by dividing the property tax levy figures by the net assessed values of the two theoretical taxing districts.
With net assessed values of slightly more than $7 billion and less than $4.7 billion, respectively, the calculations produced total estimated tax rates of 95.84 cents per $100 of net assessed value for the general services district and 65.44 cents for the full urban services district.
"This tax rate does not include tax rates associated with other taxing units such as townships, schools, libraries or special districts," the Crowe Horwath report states. "Secondly, taxpayers residing within the full urban services district would also be responsible for the tax rate associated with the general services district. These taxpayers would be receiving the benefit of the general administration of the (consolidated government) as well as additional services due to their location within the full urban services district, so it would be appropriate for them to pay both tax rates.
Recalculating the current 2010 city and county tax rates to conform to Crowe Horwath's redistributions of government functions into the general and urban services taxing districts, the firm arrived at its finding that the overall tax rate for Vanderburgh County taxpayers outside the city would increase by almost 28 cents per $100 of net assessed value. City taxpayers' tax rate would decrease by almost 13 cents.
Optional taxing districts could include partial urban services districts in which various services could be extended beyond city boundaries but not to the entire county, and special services districts for designated geographic areas where residents would receive special services for a specific reason.
All taxpayers would continue to pay township tax rates because consolidation planners have no authority to reform township government. All separate authorities now taxed countywide would continue.
Alternatives
Consolidation planners have stressed that actual property tax levies, tax rates and allocation of revenues must be adopted by a consolidated government's Common Council and may bear no resemblance to the baseline scenario.
Crowe Horwath reports that if the Common Council wanted to reduce the baseline scenario's overall general services district tax rate from 95.84 cents per $100 of net assessed value to the firm's reconfigured 2010 rate of 68.18 cents, the district's property tax levy could not exceed $39.9 million.
There are many options, Guevara said.
"You can change the way you deliver services, change the way you allocate services, and/or change the way you allocate miscellaneous revenues that can help fund the cost of services," he said. "For example, with miscellaneous revenue the general services district could get a greater share of riverboat revenue sharing, and that could lower the tax levy.
"It could be a combination of spending reductions and/or reallocation of revenues. That's the whole point: You can do this a lot of different ways."