FORT WAYNE – Local taxes are likely to change – meaning go up for at least some – in an effort to eliminate budget deficits facing Fort Wayne and other governments.

What those changes will be, however, will take months of discussions and further analysis to determine.

City Controller Pat Roller along with members of her fiscal policy team presented information to the City Council on Tuesday detailing past financial decisions and the city’s current fiscal state. In short, she said, the city faces a deficit of $3 million to $6 million between revenues and expenses for its 2013 budget.

The presentation was an effort to raise concerns, and possible options, before they become a crisis.

“We have a lot of work to do and really not a lot of time,” she said. “We need to work together and come up with some solutions.”

According to financial reports given to the council each month, the city’s general fund cash balance fell from $26.8 million at the end of 2010 to $19.8 million at the end of last year.

John Stafford, director of the Community Research Institute at IPFW and fiscal team member, told the council it has the enviable position of having numerous options to alleviate the financial crunch. Because the majority of Allen County residents live in Fort Wayne, state law gives the City Council the authority to set income tax levels for all county residents – even ones they don’t directly represent.

State law allows the council to increase income taxes to reduce property taxes, which would free up more revenues under the tax caps. If that step is taken, local communities can even raise income taxes simply to generate more revenue.

Several council members said a discussion on the appropriate level of income taxes is inevitable. Councilman John Crawford, R-at large, said he would first prefer to spend down the city’s cash reserves – including the $75 million from the lease and sale of its electric utility – before discussing any tax increases.

With the country’s overall economic recovery still struggling and huge federal deficits that need addressed, Crawford said the city needs to do everything it can to buffer itself.

But even he admitted a discussion on local taxes is needed and warranted, especially with how much state property tax caps have changed the way local governments are financed.

“At some point, you’re going to have to admit you need some more revenue,” he said.

The tax caps limit the amount of taxes people pay on their property based on that property’s tax value – 1 percent of the tax value for homes, 2 percent for rental property and 3 percent for businesses. The caps likely will cost Fort Wayne more than $13 million this year.

Councilmen Tom Smith, R-1st, and Geoff Paddock, D-5th, both agreed that a discussion on taxes will have to occur, but both said the city should include other local governments in that discussion. Smith said he would not support raising local income taxes without support from Allen County officials and leaders from other governments.

“This is going to have to be something we do together,” he said.

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