Property tax relief package fate uncertain

After weeks of posturing by Democratic and Republican leaders about the issue dearest to many Northwest Indiana residents this session, the two sides are finally into serious negotiations, and stresses are beginning to show.

The fate of property tax relief is especially precarious, despite insistence by both parties that they want to make it work, because the program has become inextricably tied to several other pieces of contentious legislation.

House Bill 1478, the active property tax package constructed by Sen. Luke Kenley, R-Noblesville, is widely noted for its complexity.

The bill proposes a shift statewide away from property taxes, by creating various new incentives for counties to adopt income taxes.

It envisions the state taking over school general fund budgets, and creates regional boards to ratify or deny school construction proposals as a way to curb excessive spending in school capital budgets.

Kenley's plan is made more complicated by its reliance on money from a controversial measure that would allow Indiana's two horse racing tracks to install slot machines.

The total $800 million in up-front licensing fees Kenley proposes from the tracks in Anderson and Shelbyville would fund a homeowner tax subsidy over the next several years, as the switch to income taxes took hold and began generating revenue around the state.

The 1,500 slot machines at each of the tracks would also be taxed annually, with the revenue defraying other state costs and keeping property taxes down.

Kenley said his plan, which includes an increase of the corporate tax cap from 2 percent to 3 percent of assessed value, would cut the predicted 2010 property tax cap levy shortfall in Lake County by $96.7 million.

Lake County public departments would still face a total $126.4 million in budget arrears, which Kenley has frequently stated could be fixed if Lake County officials would simply adopt an income tax.

Porter County's property tax budget shortfall and those of most other counties statewide would be completely erased under Kenley's plan, according to state fiscal analysts.

But many in the Statehouse worry support for the slots at tracks bill will erode unless the legislature first passes a third controversial proposal, a tough measure to crack down on the illegal slot machines currently flourishing in businesses around the state.

Anti-gambling lawmakers want to use the crackdown on so-called cherry master machines as cover for their votes in favor of the slots at tracks. They can then tell their constituents there was no expansion of gambling across the state, just a swap of illegal, unregulated gaming for above-board, revenue-producing slots.

The cherry master bill, House Bill 1510, has itself emerged as a point of contention.

A Senate amendment calls for the appointment of special prosecutors around the state to police the new law, a move many Democrats oppose.

It also adds 25 new excise police officers to patrol truck stops, taverns and other places where the illegal slots are common, an expenditure some lawmakers find extravagant given the state's financial straits.

Even if the cherry master bill succeeds, and carries the horse racing bill to passage as well, serious questions emerged last week about how much money the state can realistically expect to get for the slots at the tracks.

A House proposal called for $100 million up-front payments for each track, which Rep. Robert Kuzman pointed out already would be the most expensive such buy-in in the nation.

"So $400 million per license seems like a stretch," said Kuzman, D-Crown Point, who authored HB 1478 -- which originally dealt with personal property tax audits -- and now sits on the committee debating the property tax issue.

Kenley raised the possibility last week of auctioning the slots licenses publicly if the owners of the tracks don't offer enough cash to prop up the property tax relief program.

"I'm feeling confident those guys aren't coming up with where they need to be," Kenley said after listening to testimony from track owners. "The purpose of putting ($800 million) out there was to set the bar and find out what they're really worth."

And Rep. Trent Van Haaften, who co-authored the slots-at-tracks bill, said he doesn't think the revenue raised from the deal should be used for tax relief, anyway.

"We should treat this as found money, not as a way to prop up programs which should be a part of the normal business of state government, like tax relief," said Van Haaften, D-Mount Vernon.