JEFFERSONVILLE — The Clark County Council and the Clark County Commissioners heard from Baker Tilly Financial Services about the financial effect of Senate Bill 1 in a joint workshop meeting Monday.
This bill was passed in the most recent state legislative session and is meant to provide relief to property tax payers.
Paige Sansone of Baker Tilly went through a preliminary report put together for the Clark County government. However, she said Baker Tilly is about three weeks away from creating a property tax model that fully explains the bill’s effect.
The bill restructures taxes for municipalities and phases these changes into 2031. By that time, only one-third of certain properties will be taxable. Business personal property will also be deducted.
Sansone began by saying that the county’s cash reserves are currently in a good place.
She said that for local units of government, they are now essentially limited to their growth in net assessed value.
“What it’s going to serve to do is either slow down your growth in net assessed value, or in some cases it could reduce some parts of your assessed value,” she said.
Sansone said that as the growth on assessed value is limited, it pushes up the property tax rates leading to additional circuit breaker tax credits, reducing property tax revenue.
With circuit breaker tax credits, Sansone said that in 2025, 13.2% of the property tax levy is not collected because of these circuit breakers, with $4 million returned to the taxpayers in the form of credits.
According to information provided by the legislative services, in 2026, the county could see a potential reduction of $1.6 million, up to almost $4 million by 2028. However, she said she cannot vouch for these numbers from legislative services since she doesn’t know what assumptions they’re making.
Local income taxes, as a result of the bill, will essentially terminate by the end of 2027, except for special purpose local income tax.
The county council can now establish a local income tax at a maximum rate of 1.2% for any county service.
Other local income taxes include a 0.4% rate for fire protection and local EMS, which would be distributed to area fire protection districts and entities.
There is also the option to adopt a non-municipal local income tax at a 0.2% maximum rate that goes toward townships, libraries, airport authorities and waste management districts.
The combination of all these various LIT funds that contribute to the county government budget cannot go above 1.7%.
She said that currently everyone in the county pays the same local income tax rate. This will now be affected depending on where a person lives in the county. However, regardless of where a person lives, they will not pay more than 2.9% of local income tax.
Sansone said the optimal rate for the county services rate would be 0.8%, which would produce about $17.2 million in LIT.
“I don’t think you’re going to have to go the full 1.2%,” she said.
She said that while the property tax rate right now is lower than it was in 2022 in the county, the increase in net assessed value is really what causes taxes to increase. She said the net assessed value has increased by 33% since 2022.
The earliest the county can adopt the county services LIT is July 1, 2027. Also, these entities and municipalities do have to petition for their own LITs to be established, except for the fire and EMS LIT.
Sansone said that the county’s current contract with Heartland EMS is around $1.5 million more than what they’re getting for the EMS LIT. She said the shortfall will need to be supplemented from the general fund once the American Rescue Plan Act fund is depleted by the end of 2027, or some other revenue source.
Council member Ronald Blevins said they ought to go through the departments of the county and make cuts to things that are unneeded. Sansone said she agrees. “We got to really look at what are the true needs,” Sansone said. Council president Brian Lenfert said that once 2027 comes around, if there are no legislative changes, they will have to be particular about these LIT funds.
“We’re going to have to get super-detailed,” he said.
Still, Sansone said this analysis is contingent upon where the legislation reads today, and it could be changed in some ways by the beginning of next year.
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