By Dan Carden, Times of Northwest Indiana
dan.carden@nwi.com
INDIANAPOLIS | An assumption built into a report by Gary's state-mandated fiscal monitor could leave the city's budget several million dollars short even if the municipality enacted every one of the report's budget-cutting recommendations.
Consultant Dean Kaplan's plan to reduce city services in order to balance the budget explicitly assumes Gary will collect 100 percent of the property taxes it is owed.
Using this assumption, Kaplan built a budget for Gary that would bring city services in line with revenue limits imposed by property tax caps. His recommendations included closing several fire stations, requiring employees to pay higher health insurance premiums and transferring many city services to Lake County.
The problem? Last year only 72 percent of the property tax bills in Gary were paid, according to the Lake County auditor.
That means even the pared-down Gary budget proposed by the fiscal monitor still would come up millions of dollars short because the city will be spending money it cannot expect to collect.
Kaplan did not return a telephone call last week asking for an explanation. In an addendum to his report, Kaplan writes that he made the 100 percent assumption because he saw a city report claiming a 99.6 percent collection rate between 2003 and 2006.
Gary Mayor Rudy Clay said he couldn't believe it when he heard Kaplan explain his plan.
"For the fiscal monitor to present to the Distressed Unit Appeals Board that the city of Gary is going to collect 100 percent of the property taxes is the mother of all screw-ups because it's never going to happen," Clay said. "Not only in Gary, it's not going to happen in any city in this state."
Nearly all Lake County cities collect on more than 90 percent of property tax bills, but none reach 100 percent, said Michael Wieser, director of finance in the county auditor's office. Nonpayers, foreclosures, assessment errors and appeals all contribute to reduced collection rates, Wieser said.
In fact, Gary's current budget is based on a 90 percent to 95 percent collection rate, said Celita Green, city controller.
The state's Distressed Unit Appeals Board required Gary to hire a fiscal monitor at a cost of $320,000 to recommend ways for the city to adapt to state-mandated property tax caps. The caps have knocked the Steel City's annual property tax revenue down to barely $30 million from more than $60 million.
The mayor said last week he's doesn't think the report was worth the price.
"A lot of what the fiscal monitor recommended is what we were doing anyway," Clay said. "All we get from the fiscal monitor now is invoices."
Last year, the state's distressed unit board allowed Gary to charge higher property tax rates than any city in the state to cushion the blow of the new property tax caps, which were diminishing city revenue. On Jan. 6, Gary asked the board to continue that relief again this year while it works to reduce its budget.
A decision on Gary's 2010 request is expected in the next few months.