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INDIANAPOLIS – In the waning hours of a legislative session, negotiation sometimes breeds strange results.
What better way to explain what happened with the now-infamous rebate check for property tax relief – a notion first brought up publicly on the second-to-last day of a four-month session?
Democrat House Speaker Pat Bauer came up with the idea as a way to ensure the General Assembly gets proper credit for the $300 million in aid. But there wasn’t enough time to hash out some of the more quirky ramifications behind the move.
Republicans – who controlled the Senate and the governor’s office – could have blocked it but ultimately backed down. To be fair, the rebate language was inserted into the state budget so a decision to fight that battle would have meant a special session.
And now county officials and homeowners across the state are dealing with the consequences.
A variety of factors collided this year to cause big property tax increases for many homeowners – a 24 percent average jump around the state. Traditionally, to mitigate the hike, legislators have plowed money into a homestead credit that would directly reduce property tax bills.
But because some counties had already sent bills out – and the state wouldn’t receive the $300 million to cover the relief from the state’s two horse tracks until Nov. 1 – the rebate plan was hatched.
The average rebate statewide is expected to be about $240. But numerous issues surround the program – the first of which is cost.
Allen County Auditor Lisa Blosser recently received an additional appropriation of $48,000 from County Council to cover the cost of printing the rebate checks, and producing an explanatory insert and postage.
But that doesn’t cover expenses related to software changes to calculate the rebates or overtime for staffers to get the work done.
Adams County Auditor William Borne just got a $14,700 appropriation for similar costs and Huntington County Auditor Don Schoeff just singed a contract with an outside vendor to handle the rebate checks at a cost of $22,000.
And that is money that comes out of county general fund dollars – supported by local property taxes.
David Bottorff, executive director of the Association of Indiana Counties, said it originally estimated it would cost about $1.35 per rebate check. But he said that number has jumped to as high as $2 a check, partly due to charges from software companies to reprogram the systems.
“It would have been much more efficient to put the money up front as a homestead credit,” he said.
But even that would have cost something.
Noble County Auditor Jackie Knafel said even if a credit was added to the fall property tax installment she would have had to reprint those bills. This is because many counties print one bill in the spring that shows the amount to be paid both installments.
“It would have been more costly to do that in the fall,” she said. “Just waiting until next year’s taxes would have been the cheapest option.”
Borne said he and several other counties are considering a joint contract with an outside vendor to print the thousands of rebate checks. This would allow him to get the checks out by Christmas but it would be much slower if the checks have to be printed within the county office.
“It’s what the legislature wants, and we’ll do it,” he said.
But others are concerned about the timeline.
Department of Local Government Finance Spokeswoman Mary Jane Michalak said the state’s only involvement is to send the money and certified rates for calculating the rebate amount to county auditors by Nov. 1.
She said the State Board of Accounts and the State Budget Agency are helping with that work and the state will hit its deadline.
From there, county auditors are supposed to certify rebate check amounts to the county treasurer by Dec. 20 so the treasurer can print and mail the checks.
But the usual November tax deadline is complicating that process.
For instance, Allen County’s fall tax due date is Nov. 13.
Blosser said the treasurer will need at least a month after that to post all the payments before county officials can begin checking for tax delinquencies, pushing Allen rebate checks possibly to March.
The law creating the rebates requires the rebate money to be first applied to any property tax delinquencies the owner might have before sending them the cash.
Senate President Pro Tem David Long, R-Fort Wayne, was unaware of this part of the process.
“It does bother me that people would have the check taken away,” he said. “If someone is delinquent in their taxes it should be handled in the normal process. This is intended as relief.”
But he also said the cost and timeliness of the rebate shouldn’t overshadow the big picture.
“The bottom line is, it is taxpayer friendly,” Long said. “It is not a huge cost when you are honest about what you would have to do anyway with a credit.”
Noble County’s Knafel also said the county will still have to issue a check for zero dollars if the rebate has been put toward other obligations. And she noted the staff time to cross-check delinquencies will be significant.
“The biggest problem we have is this is falling into the time where we are collecting taxes and then doing December settlement. It makes it very, very difficult – if not near impossible – to get the checks out in December,” Schoeff said. “I think everybody is in agreement that the rebate process is the wrong direction to go. It would have been much better to take that off of next year’s taxes.
“And I really believe that in some cases it is going to be such a small amount that I think it is going to irritate (taxpayers) that the legislature did it at all.”
Then there are the tax implications. The State Board of Accounts received an opinion from the IRS that said counties do not have to mail out federal 1099s showing miscellaneous income.
But Bottorff said Hoosiers who itemize on their federal tax form – and therefore receive a deduction for the full amount of property taxes paid – will have to show the rebate as income.
On a net basis, taxpayers are not hurt by the process, but it is one more detail to remember.
Some county officials also fear confusion over who the check goes to.
Counties are not sending checks to mortgage companies, instead earmarking the check to the property owner who paid the bill.
But in the case where properties have since changed hands, it might be especially cumbersome making sure the person who actually paid the taxes gets the rebate.
“That’s a whole other nightmare,” Knafel said. “How can we ensure that we have the right person? It will be very difficult.”
Rep. Phil GiaQuinta, D-Fort Wayne, still stands behind the rebate idea that he voted for.
“It might cause a little bit of extra work but the end result is property tax relief,” he said.
This isn’t swaying Blosser, though, whose office is charged with doing much of that extra work.
“This is really bad government at work,” she said.
nkelly@jg.net
