Times of Northwest Indiana
Details of the property tax relief package the Indiana General Assembly approved before adjourning for the year Friday.
IMPACT
Legislative staff estimate the plan will lower homeowner property tax bills by an average of 26 percent this year in Lake County and 24 percent in Porter County. Next year's bills are expected to be more than 30 percent lower than what Northwest Indiana homeowners paid on average in 2007.
TAX HIKES
SALES: On April 1, the state sales tax will rise from 6 percent to 7 percent. The move will raise $620 million this year, which will be used to provide property tax credits to homeowners. Starting next year, the sales tax money will be used to shift about $1 billion in local costs off property taxes and onto the state's ledger.
INCOME: Counties can impose income taxes of up to 1 percent to provide property tax relief or offset local government funding losses triggered by new tax caps. Counties that pass a property tax relief income tax of at least 0.25 percent can raise the tax another 0.25 percent to fund police and fire services.
The legislation also gives Lake County new options for divvying up the $86.6 million in property tax relief that could be raised by a 1 percent local income tax. For each of the three distribution formulas, the Lake County Council can decide how to split the relief among homeowners, landlords and businesses. The options are to:
-- Use the income tax proceeds to reduce county government tax levies
-- Return the income tax money to property owners in the city where it was raised
-- Distribute 60 percent of the money to property owners in the city or township where it was raised and the other 40 percent by population
CAPS
In 90 counties, including Porter, property tax bills will be capped at 1 percent of assessed value for homeowners, 2 percent for landlords and 3 percent for businesses by 2010. (Bills will be capped at 1.5 percent, 2.5 percent and 3.5 percent respectively in those counties next year.)
In Lake and St. Joseph counties, existing construction debt won't be covered by the caps until 2020. Local government and schools in Lake County faced $244 million in annual spending cuts under the full caps, but removing their debt from the calculation of the caps lowered those losses to $154 million. For Lake County homeowners, the move means their bills will capped somewhere between 1.5 percent and 2 percent of their home's value in 2009. Starting in 2010, the average cap for Lake County homeowners will be 1.2 percent, but the range of tax bills will be 1 percent to 1.8 percent of a home's value. The caps will inch downward as local government retires existing debt, and all homeowners will be guaranteed a 1 percent cap in 2010, meaning they would pay no more than $1,000 in annual taxes on a home worth $100,000.
DISTRESSED UNITS
A local government or school district that loses at least 5 percent of its budget to the new tax caps will be able to make funding pleas to a new Distressed Unit Appeal Board. The seven-member board, a majority of which will be appointed by the governor, will have the power to exempt debt from the tax caps or relax the caps between now and 2012.
SCHOOLS
Lawmakers set aside $50 million next year and $70 million in 2010 to split among school districts that lose more than 2 percent of their property tax collection to the new tax caps. Statewide, schools had been expected to lose about $90 million next year and $190 million in 2010.
But the $120 million set aside helped lower the projected losses to about $8 million next year and $89 million in 2010.
REFERENDA
Voters must give approval to new construction projects that exceed:
$12 million for municipal, county or township projects
$20 million for high school classroom projects
$10 million for elementary and middle school classroom projects
ASSESSORS
Township assessors will be eliminated in all but 42 of Indiana's 1,008 townships. There will be referendums in November to decided whether local assessors keep their jobs in the 42 townships that handle more than 15,000 parcels. The referendums will decide the fate of assessors in Center, Calumet, Hobart, North, Ross and St. John townships in Lake County and Center and Portage townships in Porter County.
COST SHIFTS
Next year the state will eliminate $2 billion in property tax relief subsidies to local government and use about $1 billion from a penny sale tax hike to take over roughly $3 billion in local program costs. The following will be shifted to the state:
$2.4 billion in school operating (general fund) costs
$487 million in child welfare levies
$100 million in Hospital Care for the Indigent levies ($25.5 million from Lake County)
$92 million in municipal police and fire pension costs for employees hired prior to 1977
$23 million in county juvenile incarcerations costs
SENIORS
Seniors who own a home worth $160,000 or less and have a household income of less than $30,000 for singles or $40,000 for couples are guaranteed property tax hikes of no more than 2 percent a year. In other words, a qualifying senior who paid $1,000 in property taxes last year would pay no more than $1,020 this year.
RENTERS
Increased the renter's deduction on state income taxes from $2,500 to $3,000.
LOW-INCOME FAMILIES
Increases the state earned income tax credit by 50 percent, from 6 percent to 9 percent.