Subscribe
Jobs
Cars
Real Estate
Apts
Classifieds
Shop
INDIANAPOLIS – Everyone’s doing it. The governor. State legislators. Mayors and county commissioners. Clerk-treasurers.
They are all blaming someone else for the statewide increases in property tax bills.
And, to a certain degree, they all have a point.
The factors that go into calculating property taxes are complex, and there is no easy way to assess fault. Everyone involved generally has the best of intentions, but in the end, state policy changes have interacted with local spending decisions to create increases.
Since returning from his July 4 vacation, Gov. Mitch Daniels has been extremely visible on the subject – sending out late night announcements and Saturday proposals while holding a host of news conferences during recent days.
His message has been consistent throughout – governments and schools are to blame for “runaway local spending” – and he has even threatened to hold upcoming budgets for local units to the rate of inflation.
“The cause of the problem is local,” Daniels said.
Indeed, virtually all property taxes go to local units – whether your county, city, township, school or library. That point is not in contention.
But there is more to it than that.
“Very little of it has to do with local government spending. It would be a mistake if we were to respond to this property tax crisis by clamping down on local government spending again because that really isn’t the problem,” said Larry DeBoer – professor of Agricultural Economics at Purdue University and a longtime state tax expert. “In some places there are school projects, but mostly it is state shifts.”
A Legislative Services Agency analysis from April showed local spending having a small effect on the 24 percent average increase in homestead bills expected statewide this year. And DeBoer’s updated evaluation from June echoes much the same.
For instance, homestead tax bills are going up an average 10.5 percent statewide because of trending – a newly implemented requirement from state legislators that property values be updated annually based on sales of similar properties on the open market.
Because tax bills are partly based on a home’s assessed value, the more your home is worth the higher your tax bill. Though some Hoosiers gape at seemingly unbelievable increases, it helps to remember that this year’s assessed value growth is over a six-year period. The state’s previous values were from 1999.
“From here on in, we update values one year at a time and you will see small differences but not this big jump,” DeBoer said.
Another key factor in this year’s residential increases is the elimination of the inventory tax previously paid by businesses, which accounts for bills going up about 3.7 percent on average statewide.
The revenue usually collected from that tax has now been shifted to the property tax rolls except in 43 counties that took advantage of an option to raise a local income tax to cover the gap.
Similarly, Republicans in charge of the 2005 state budget – and with support from Daniels – capped the property tax replacement credit, which is a subsidy state government pays to locals to keep tax bills down.
In all, most of the 24 percent statewide average tax increase has been caused by changes in state policy made by legislators or the administration.
But that doesn’t mean some local governments shouldn’t share some of the grief.
Data from the Indiana Office of Management and Budget show how countywide property tax spending has grown from 2006 to 2007. For instance, of the 67 counties whose levies have been certified by the state, only 15 grew less than 3 percent.
LaGrange County has the largest percentage growth in northeast Indiana, seeing the certified property tax levy for all units in the county growing by 9.87 percent.
Some units within the county kept their spending the same, but many others plan to spend many more property tax dollars in 2007 than 2006.
For instance, Newbury Township’s levy grew from just $50,541 to $128,066 – an increase of 153 percent. Virtually all of the increased money is tapped for township assistance or fire expenditures.
Newbury Township Trustee Ann Glick said she wasn’t in office last year when the 2007 budget was adopted and couldn’t comment specifically on the increases.
But generally, she said, “people in elected office need to spend government funds like they are spending their own money. I think if we did that, we would have less spending.”
The town of Shipshewana is another governmental unit that saw a sharp increase in property tax spending – 22 percent, from $559,000 to about $682,000.
Town Manager Bill Boyer said the town’s tourism industry has required it to make additional improvements, including a new town center that is a mix of museum and convention hall.
He also noted the park budget has increased because the town installed new park equipment.
“We are probably unique, but I think we tried to do the best we can,” Boyer said “I would suspect that probably that town center project is what has impacted the budget in the last year or two. It was complicated.”
Huntington County’s units came in second locally for property tax levy growth with an 8.13 percent increase.
The property tax budget for the town of Roanoke grew by 12 percent though Clerk-Treasurer JoAnne Kirchner said the town has been affected by four annexations that have kicked in over the past two years.
She said that resulted in hiring another police officer, buying new fire equipment and increasing street maintenance, such as snow plowing.
“The town is very frugal,” Kirchner said. “We have increased insurance costs, building maintenance and fuel increases. It’s been very, very difficult for towns to continue to function at a level that is acceptable to the citizens.
“Town officials are very cognizant of our residents’ tax dollars. We pay taxes too.”
She also noted that schools are responsible for at least half of the property tax pie – including a large portion related to debt service, or paying off bonds for large construction projects.
While property owners in Fort Wayne recently stopped a $500 million Fort Wayne Community Schools building project using the remonstrance process, citizens in general rarely use that option.
“What I think the current experience shows more than anything is that property taxes are driven by local spending decisions by units of local government, schools being the biggest, and that citizen activism and citizen scrutiny at the local level … has been inadequate in some cases in the past,” Daniels said.
DeBoer also points out, though, that if one person’s taxes are going up another person’s might be going down.
“What’s happening is people’s shares are changing a whole lot. The share paid by commercial and industrial has gone down and the share of residential has gone up.”
And if this is a shift, there are thousands of taxpayers paying less.
“They are keeping their heads down, as I would do in this environment,” DeBoer said.
nkelly@jg.net
