Merrillville looks to state for financial help

MERRILLVILLE--Town officials have given up hope of raising revenue with hotel/motel or food and beverage taxes and are now seeking distressed municipality status in 2010 in an effort to relieve its financial crisis.

"We empowered Town Attorney Steve Bower to go to Indianapolis to meet with whoever he has to meet with to get the ball rolling," Councilman Richard Hardaway, D-2nd, said.

Bower said Wednesday he will be starting dialogue with attorneys of the Indiana Department of Local Government Finance, whose Distressed Unit Appeals Board determines if a municipality has become distressed as a result of the circuit breaker cap on property tax bills. If a municipality had at least a 5 percent reduction in tax collections, it can be granted relief from the tax freeze, allowing it to increase its budget with additional tax money.

The state imposed the tax levy freeze on Lake County municipalities when it became the only county in the state not to impose a county income tax.

The freeze placed a financial burden on communities like Merrillville, which has been struggling to meet its expenses. Finding itself still $270,000 short of revenues compared to expenses, the Council decided Tuesday night to rescind employee raises for the remainder of this year and 2010. Police officers had received a $2,000 raise, while other employees had $1,500 pay increases. Longevity pay for employees with five or more years of service has been rescinded this year as well, but will be reinstated next year, Hardaway said.

"We realized these were a financial burden the town could not afford," Hardaway said.

These cuts were made in lieu of the one-week unpaid furloughs for all employees that had been discussed when the council realized the furloughs would have to be for three weeks instead one one to make up the shortfall.

Bower said he is in the process of preparing a resume of the town of Merrillville's situation, adding he was unsure how long the process would take. It took the city of Gary nine months to go through the procedure, but Bower pointed out Gary was the first applicant. Gary received about $11.3 million in circuit breaker credit relief, about 1/3 of the $35 million it requested, according to the state Web site.

Bower also stressed that Merrillville's situation is not the same as Gary's as it does not have a water and sewer department to generate money and pick up some of the town's operating costs, nor does it have a bloated budget.

"The only place Merrillville can generate money is through property taxes," Bower said. When it's frozen, the municipality suffers. "Have health costs gone down in the last three years? My goodness, no," Bower said.

Hardaway said some additional revenue is usually raised through new construction, but the economy put a damper on that this year.

The town court is self-supporting, neither raising much revenue or costing the town any money.

Council members had proposed various means to raise additional revenue, including imposing the hotel/motel and food and beverage taxes and requiring all contractors who do work in the community to pay a fee to take a test in their field.

Zoning Director Dorinda Gregor said any person working for a contractor would have to take the test and pay the fee, the amount of which had not been determined, only once, which essentially means it would have a one-time impact on the budget. Even then, the approximately $25,000 it could bring in would not put much of a dent in the town's proposed $7 million budget, she said.

Bower said there already is a county-wide hotel/motel tax to feed tourism. To try to implement one for Merrillville would require action by the state legislature, which Bower said, brings another problem to the table.

"Any community in Northwest Indiana going before the legislature brings with it a stigma. They think all budgets of all municipalities in Northwest Indiana must be bloated. That's not true for Merrillville, or St. John or Winfield," he said.