Growing numbers of Indiana communities have sought property tax levies beyond their traditional caps thanks to rising property values. But lawmakers want to make it harder.
To make a maximum levy appeal based on three-year assessed value growth — the most common appeal type — the growth must exceed a statewide average growth quotient by at least 2%. New legislation would raise that that to 4%, drawing opposition from multiple local units of government Tuesday.
House Bill 1120 would further tackle high property taxes by extending a cap on school operating referendum levies, forcing districts with certain debt service rates to put big projects on the ballot and mandating lower values for large homesteads.
“I understand we’re trying to balance two important things: taxpayer relief and local control,” said Oliver Barie, a lobbyist representing a group of northeast Indiana public schools. But schools, he said, stand to lose millions of dollars they’d otherwise receive.
The Senate Tax and Fiscal Policy Committee heard about 90 minutes of discussion on the bill but didn’t vote on it. Rep. Jeff Thompson, R-Lizton, indicated some provisions weren’t yet finalized.
Indiana restricts how much money local units of government can collect in property taxes. But they can also appeal their maximum levies for a list of reasons, including unexpected growth in assessed value.
Dozens of local taxing units — from libraries and townships to cities and counties — submitted 95 requests to review their maximum levies last year, according to Indiana Department of Local Government Finance (DLGF) records obtained by the Capital Chronicle. About 80% were based on assessed value growth.
DLGF partially or wholly approved 84 of the requests, allowing those units to collect $40 million more from their taxpayers.
Thompson, however, said he hoped to cut the number of units eligible for the growth appeals in “half” through his legislation.
“I’m trying to at least push back on some of that,” he added.
David Potter, a Republican member of the Danville Town Council, said the proposal would “handicap” the town’s ability to “meet a growing demand for services.”
He said that just 11% of the town’s assessed value pays a “full rate” because some is tax-exempt and the rest hits the constitutional tax caps. The town made an appeal last year to bulk up its public safety services, but he said he’s worried about the future.
Accelerate Indiana Municipalities’ Jenna Bentley described the current limit as a “high bar for most to meet” and emphasized that qualifying for an appeal doesn’t guarantee DLGF will approve one. Local units must back up their requests with extensive evidence of need.
Lawmakers take aim at school operating referendum levies
Assessed value growth also increases the amount of money school corporations collect through their operating referendum levies — and the amount taxpayers cough up. The levies are outside the tax caps.
Thompson hopes to extend a one-year cap on growth in levies approved before 2023. His bill would make the 3% growth cap permanent and add a growth factor.
Schools came out in force on Tuesday, with Barie remarking that growing, stable and shrinking institutions would all “still lose.”
A fiscal analysis shows the proposal would affect 52 school corporations operating under pre-2023 levies. They’d collect $35.2 million less than expected in 2025 and $54 million less in 2026. The losses would continue until the levies expire.
Barie said the measure would create a “seemingly arbitrary inequity” among school corporations because corporations passing referenda beginning this year wouldn’t be subject to the cap.
Brian Tomamichel, assistant operations superintendent at Westfield Washington Schools, said the district lost $2 million in the cap’s first year and expects to lose $13.9 million over the life of a levy voters renewed two years ago — despite being a “fast-growing” district.
Those voters, he said, knew what they’d get out of the levy: welding, Junior Reserve Officer Training Corps courses, an orchestra and more.
“Currently, all those programs are placed on hold until we can figure out how we’re going to fund them,” Tomamichel said. “Through this, we’re actually going back to our community and saying ‘Hey, we can’t meet what we promised you because of the restrictions that have been put on us.'”
Tony Cook, a former lawmaker speaking on behalf of a growing and suburban schools group, criticized state-level digs at locally approved tax measures.
“What are we trying to do? Save the voters from themselves?” he asked.
The Indiana Chamber of Commerce previously testified in support of the provision, arguing lawmakers should get to decide how to handle the revenue “windfall” schools get during major property tax increases. No supporters testified Tuesday, however.
School debt also discussed
The bill would additionally extend a previously temporary provision pushing political subdivisions, like schools, with higher debt service tax rates toward referenda.
If subdivisions have debt service rates greater than 40 cents per $100 of assessed value, any project that would be financed by bonds or a lease would be considered a “controlled project” — even if the cost doesn’t meet traditional thresholds.
The designation comes with additional steps like public hearings. Property owners or registered voters in debt-heavy subdivisions could also request a petition and remonstrance process or referendum.
If the rates exceed 80 cents per $100, subdivisions would be required to put the project on the ballot as a public question.
Scott Wyndham, the superintendent of the Avon Community School Corporation, said the change would require the district to hold a referendum for every debt issuance moving forward.
The growing district, he said, has issued debt for school construction and maintenance even as it’s voluntarily lowered its tax rates.
“To spring this mandate on schools … would really put in place impossible expectations,” he said, given the school’s 20-year bonds.
Schools expert Denny Costerison, representing a variety of stakeholder groups, said his main issue with the cap and debt provisions is that last year’s legislation would’ve sunset both.
“As this bill is written, they become permanent tax policy,” he said.
He asked the committee to leave the issue to a two-year task force examining the state’s tax system and to act instead during a budget year. That prompted Rep. Travis Holdman, R-Markle — who is leading the task force — to confess nervousness at the number of witnesses turning to the body as a “relief valve.”
Other provisions
Another stab at lowering property taxes would force county assessors to at least halve the value of homesteads on big lots.
In Indiana, homestead “sites” of up to one acre are taxed at lower rates than additional acres. Those are considered “residential excess” acres.
House Bill 1120 would require assessors to reduce the base value of the land by at least 50%. Witnesses, however, were skeptical of the idea.
“It doesn’t really accomplish that that goal of giving relief,” Bartholomew County Assessor Ginny Whipple, a Republican, told the committee.
She said that’s because the state already requires assessors to value such land close to market value, so lowering the value of one part of the parcel would force an increase in another part.
Otherwise, Whipple said, DLGF won’t approve the values. In that scenario, a local unit of government wouldn’t be able to set a tax rate and wouldn’t be able to collect taxes.
“Don’t mess with the value. We assessors do value,” Whipple concluded. She suggested that lawmakers — “if they must” make the change — consider a net tax deduction instead.
Thompson’s legislation would also let disabled veterans with homes assessed at $240,000 or less qualify for a property tax deduction, up from the current $200,000 limits.
Veteran witnesses thanked lawmakers for the boost but cautioned they’d be back within years — like in the past — as property values continue to rise.