By Jon Seidel, Post-Tribune
jseidel@post-trib.com
Merrillville is shutting off street lights and forcing employees to take furlough days so the town of 33,000 people can save money.
Gary, its neighbor to the north, has been forced into similar cost-cutting measures in the last 18 months, but a state tax appeals board granted Gary $22.8 million in budget relief for 2009.
The deadline for cities and towns to petition the Indiana Distressed Unit Appeals Board for 2010 is Dec. 8. Gary's City Council is likely to approve a petition soon, but Merrillville's leaders don't expect to join them.
Town attorney Steve Bower said Merrillville doesn't qualify for DUAB relief even though, according to Bower, it has already cut its budget as much as it can.
"This isn't a situation in which we have elected officials going to Las Vegas for a national town officials meeting," Bower said. "We don't have any of that. We don't have a $2,000-a-month slush fund for each elected council person to spend however they see fit. We've got a lean budget now."
Merrillville set its budget at about $7.5 million in 2008 and 2009, Bower said. A state analysis predicts new property tax caps will reduce its revenue in 2010 by $2,720.
Only taxing units whose property tax collections are reduced at least 5 percent by the new tax caps can petition the DUAB. Gary, which has approved a 2010 general fund budget of $56.4 million, can expect the caps to reduce its 2010 revenue by $31 million, more than 50 percent, according to the report.
Gary is the only city to petition the DUAB since the implementation of the tax caps. This year, those caps were set at 1.5 percent for homeowners, 2.5 percent for landlords and 3.5 percent for commercial properties.
Next year, those caps are set to drop to 1, 2 and 3 percent, respectively, and Gary leaders predict that will prompt other cities to join them at the DUAB in 2010. No Northwest Indiana officials reached by the Post-Tribune said they plan to petition the DUAB, though.
DUAB staff declined in an e-mail to speculate about other cities filing petitions but said they've received no specific inquiries about the process.
Gov. Mitch Daniels appoints the DUAB members. He and board chairman Ryan Kitchell have said taxing units that petition the board must show they've done everything they can to help themselves before receiving special treatment.
Critics of Gary City Hall, including some Gary residents, argued last year that hasn't happened in their city. Months after relief was granted, a state audit was released that took Gary to task for its 2008 spending which included $275,000 spent from the City Council's Grants and Subsidies budget for "promotion of the city," travel expenses for Mayor Rudy Clay and members of the City Council and monthly meals for City Clerk Suzette Raggs.
That report was prepared by the State Board of Accounts, a department with a seat on the DUAB.
Gary's budget shrinking
Gary officials argue they've made several cuts, though. After accepting relief from the DUAB, the City Council decreased Gary's 2009 general fund budget from $63.3 million to $58 million. Much of that savings came from layoffs and department consolidations.
The 2010 general fund budget is set even lower at $56.4 million. Gary expects to save next year by, among other things, eliminating the Grants and Subsidies fund in every department but the city controller's office.
When Clay took office in 2006 the general fund budget had been set at $70 million. A study by the city controller shows Gary's total tax levy has dropped from $65.6 million in 2006 to $48.6 million in 2010.
Still, implementing the property tax caps in Gary would force even more drastic cuts. Daniels is pushing to make those caps part of the state's constitution by 2012. If that happens, the DUAB will have no way to help Gary.
As a requirement of the DUAB's relief in 2009, Gary had to hire Philadelphia-based Public Financial Management Inc. as a fiscal monitor at a price of $320,000. The PFM staff has met with city officials to prepare a report on the state of Gary's finances that is due the first week of December. Dean Kaplan, PFM'sz managing director, said last week the firm's work is on schedule.
The goal of the report is to determine how Gary can bring itself into compliance with the property tax caps by 2012. Kaplan said in September his firm will likely recommend "wrenching" but non-punitive measures for the city.
"Our goal always is to be constructive and useful," Kaplan said.
Clay said he's asked his staff to work with PFM's team and provide any documents they may need to finish their report. The mayor has said he's hopeful the teaming up of his staff, PFM and the distressed board will pull Gary through its latest financial crisis.