By Bryan Corbin, Evansville Courier & Press

INDIANAPOLIS Local officials in Indiana are now getting a clear glimpse of the effect spending controls in the property tax relief package passed Friday by the General Assembly will have on their budgets over the next two years, and they are apprehensive.

The law is expected to mean millions of dollars less in revenue locally for city and county governments and for schools.

Officials already are looking for ways to cope with less money.

"What we try to do initially is make sure it doesn't affect our classrooms," said Mike Duckworth, Evansville-Vanderburgh School Corp. School Board president. "That gets tougher and tougher as they chip away at the money we have."

In response to homeowner demands for tax relief, House Bill 1001 would reduce residential property taxes by an average of about 30 percent, officials said, and cap property taxes at no more than 1 percent of a home's assessed value. Phased in over two years, the property tax caps will be 2 percent of assessed value for rental property and farmland, and 3 percent for businesses.

To pay for relief, the plan increases the 6 percent sales tax to 7 percent.

House Bill 1001 will transfer the duties of most township assessors to county assessors; and referendums will give the public more of a say in public construction projects, too.

The referendum requirements in House Bill 1001 could factor into upcoming EVSC building projects, such as a new North Side high school or into Evansville's decision to build an arena to replace Roberts Stadium.

Although taxpayers will save $524 million in 2010 in property taxes, that's $524 million in revenue that schools and local governments won't collect.

"I am pleased that we have entered a new era of taxpayer protection in Indiana," Gov. Mitch Daniels said Friday after the Legislature passed the property tax package he advocated. "It's a historic win for taxpayers, and no more will taxpayers be asked to adjust their tax bills to government's appetite. Government will now begin to adjust its spending to what taxpayers can reasonably afford."

Here is a look at the local impact:

  • For the EVSC, the property tax caps or circuit breakers mean the schools would get $102,172 less in 2009 than they would have without the caps. In 2010, the EVSC would receive $1,447,460 less.

    As a result of those spending controls, Duckworth said the EVSC again will have to "tighten its belt." He said current funding is "being squeezed as it is," and he's not sure what else the EVSC can cut from its budget.

    "The (school) board and the superintendent have some very critical decisions to make as to how we absorb these losses," he said.

    The corporation's 22,400 students and more than 3,000 employees make the EVSC the state's third-largest public school system. Its budget is about $200 million.

    To cushion the blow, the Legislature approved payments to public schools - $50 million in 2008 and $70 million in 2009 - to offset lost revenues.

    Also, the state is taking over the remaining 15 percent of school operating costs now paid though property taxes; the state will assume 100 percent of those levies.

  • The tax jolt of the circuit breakers also will be felt in the Civic Center, where Evansville city offices and Vanderburgh County offices are based.

    The city of Evansville will see $223,539 less revenue in 2009 and $3,134,201 less in 2010, according to Legislative Services Agency estimates.

    The reductions mean Evansville will renegotiate its city police, fire and transit worker contracts this year, said Curt John, a City Council member. He noted that more than 80 percent of the general fund money the city now collects through property taxes is used for public safety wages and benefits. However, the state is taking over the cost local governments owe for pre-1977 police and fire pensions.

    John said some spending would "undoubtedly" be eliminated. He suggested paving and sidewalks as possibilities.

    With many municipal governments facing shortfalls in funding public safety and other services, House Bill 1001 says counties will face the annual option to increase local-option income taxes, to raise revenue to make up the difference.

    John hopes the city won't have to raise the local income tax, but it will have to shift money away from other projects in order to fund public safety.

    Vanderburgh County stands to see $103,085 less in property tax revenue in 2009 and $1,460,525 less in 2010.

    County Council President Marsha Abell said Vanderburgh already runs on a lean budget. She is unwilling to raise the local-option income tax, but she doesn't know where the County Council can cut more from its $60 million budget.

    "We've got to keep (sheriff's department) squad cars on the road and pave the potholes," Abell said. "To say I don't know where we're going to get (the money to do that) is an understatement."

    Abell suggested that combining some county public safety efforts with the city government that also will be strapped for cash by 2010 might be necessary.

  • Next door in Warrick County, officials will see $60,277 less revenue in 2009 and $160,273 less in 2010.

    "If it's that low, we can get by with that. If it's a half million dollars or less, Warrick County can handle it," Warrick County Council member Greg Richmond said.

    County government might have to forgo raises for its employees, but layoffs probably can be avoided, he said.

    "I know everybody's got to do their part cutting back, and we are a part of that," Richmond said.

  • Besides dialing back their spending, local government officials face other changes. Township assessors will be eliminated in most of the state's 1,008 townships.

    Effective July 1, their duties will be transferred to the 92 county assessors. For the 42 largest townships with 15,000 parcels or more - such as Knight, Center and Pigeon townships in Vanderburgh County - voters will decide in local referendums in November whether to retain township assessors or eliminate them.

    Glen Tornatta Koob, the Perry Township assessor, said she wonders about the logistical difficulties of transitioning her office to county management.

    Vanderburgh County Assessor Jonathan Weaver plans to absorb the township assessors' offices into his. Bringing the staffs under one roof will save money, he predicted.

    "I want to see when their lease agreements expire and bring them in-house and work on getting space in the Civic Center large enough to accommodate everybody," Weaver said.

    "I will try to save as many jobs as possible, but at the same time help the taxpayer out and reduce positions of redundancy."

  • Voters would decide through referendums whether to build public construction projects such as school expansions, jails or libraries. Elementary and middle school academic facilities costing more than $10 million and high school academic facilities costing more than $20 million would be subject to referendums. For other public projects paid for through property taxes, referendums would be triggered if the cost is $12 million or more.

    EVSC officials plan to unveil a strategic plan Monday night, Duckworth said. Some building projects included in that plan might be subject to referendums, but Duckworth did not yet know which ones would exceed the dollar threshold to trigger voter approval.

  • For consumers, the 7 percent sales tax kicks in April 1.

    The Associated Press contributed to this report.

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