Gary City Hall will argue improving local property tax collection is key to its survival when it appears next month before a state tax appeals board.
"Much of the (city's) debt can only be eliminated through increased economic development, better property tax collection rate, forgiveness or an influx of cash," Gary argues in a presentation received this week at the Statehouse.
The presentation was included in the material sent to the Indiana Distressed Unit Appeals Board. Gary City Hall, the Gary Sanitary District, Gary Stormwater Management District and Gary Public Transportation Corp. want the board to raise local property tax caps so they will have more money to cover expenditures next year.
Those caps are set at 1 percent of assessed value for homeowners, 2 percent for landlords and farmers and 3 percent for commercial properties. The board raised them in Gary in 2009 and 2010, but 2011 will be the last year the option is available. That's because voters approved a referendum adding those caps to the state's constitution.
Gary argues it is swiftly implementing recommendations of a state-mandated fiscal monitor, including furlough days, wage freezes, 5 percent pay reductions for employees making $50,000 or more, consolidating fire stations and laying off firefighters.
But it says it ended 2009 with a deficit and will likely do so again this year because of poor tax collections. It also said it couldn't obtain funding for its Park Department through tax anticipation warrants because the county couldn't predict a collection rate.
Eight parks employees were recently laid off.
Lake County Auditor Peggy Katona said her office wasn't asked for the collection rate and could provide it if asked.
"We can provide it any time somebody wants the tax collection rate," Katona said. "We can do that daily."
Michael Wieser, the auditor's director of finance, said the tax distribution process could move faster if the county received information sooner from local assessors. He also said there's little the county can do to prompt tax payments beyond placing properties on tax sale.
"That's the only hammer that we have," Wieser said.
The collection rate in Gary for the first installment of this year's property taxes was 76.2 percent, Wieser said.
There's some optimism in the report. Gary points to a proposed $90 million data center planned for 1301 Broadway. Construction on the project, by DuSable Communications International, is set to begin in early 2011.
The Gary City Council approved a personal property tax exemption for the project, but DuSable is still expected to pay real property taxes.
"Only with an increased tax base will Gary begin to generate the tax dollars needed to sustain city services to its residents," city officials said in the presentation.
The city lists nearly $47 million in debt, $26 million of which is owed to the Gary Sanitary District and various city funds. It also has $10.9 million in long-term debt, owes $7.35 million to the Northwest Indiana Regional Development Authority and must soon pay $2.4 million for medical claims and utility bills.
The DUAB hasn't set a date to hear Gary's petition, but a staff member said the meeting will likely be held the first week of January.