Howard County feeling burden of property tax caps

scott.smith@kokomotribune.com

New estimates show property tax caps will reduce Hoosier property tax bills $121 million less than originally anticipated, state officials announced last week.

That's why Howard County and Kokomo city officials are perplexed.

While estimates of the total statewide impact of the tax caps were downgraded, the impact on both Kokomo and Howard County are now expected to be even greater.

Kokomo city controller Jim Brannon had no immediate word from state officials Friday.

"I'm somewhat befuddled," Brannon said. "The state cap loss dropped, and ours went up."

Brannon said his only initial guess would be the implementation of a local option income tax - which replaces property tax revenue - might have something to do with the new numbers.

The Legislative Services Agency estimated last March that caps on property tax bills could reduce revenue to local governments by about $524 million in 2010, when the caps will be fully implemented.

The new estimates show an impact of about $403 million, or $121 million less than previously thought.

That's good news for some local governments that feared being hit hard by the caps, but it also means that savings to taxpayers aren't as great as previously estimated.

The new numbers have hurt some counties, but will help many others.

In Kokomo, the impact of the tax caps grew by about $140,000 over the next two years.

Using the initial figures put out last March, city officials thought they'd have $2.2 million less to spend over the two-year period of 2009 and 2010, due to the tax caps.

The new numbers issued this week show the caps will cost the city about $2.34 million over the next two years.

Howard County government originally expected to lose about $770,000. The new figures show the county losing more than $798,000.

But in Marion County, the projected revenue impact of the caps fell from $111 million under the old estimate to $63 million under the new figures. Vanderburgh County saw the impact fall from $6.5 million to $5.5 million.

The latest figures reflect updated property tax assessment and levy data, revised growth rates and other factors.

The property tax plan passed during the 2008 legislative session will cap property tax bills to homeowners at 1 percent of their home's assessed value by 2010, with 2 percent limits on rental and agricultural property and 3 percent on business property.

Republican leaders in the Statehouse want to approve a proposed amendment that would put those limits into the state constitution. If the Indiana General Assembly approves the proposed constitutional amendment either in 2009 or 2010, the question would appear on the ballot for voter ratification in 2010.

But Democrats and local government officials want to wait to see the impact of the caps before making them more permanent. The revised numbers could come into play as lawmakers debate the issue.

Senate President Pro Tem David Long, R-Fort Wayne, said Thursday morning before the new numbers were released that lawmakers should move quickly to pass the constitutional amendment. He said local governments need to know that legislators are serious about making the property tax caps permanent.

"We're asking local government to make changes and to be less reliant on property taxes," Long said. "The sooner we lay down the gauntlet and say we're going to go forward with the caps and it's going to go to the voters in 2010, the sooner people can start budgeting and planning for the future at the local level."

The Associated Press contributed to this story.