Shift That Burden: Biz Owners To Pay For Residential Property Tax Relief

Taxman While we're talking taxes, consider that the Guv's Totally Rad Property Tax Solution increases the burden on businesses to fund relief for homeowners. (When's the last time you saw a business walk into a voting booth?) Further compounding the problem, the Indianapolis Business Journal's Peter Schnitzler brings us this story today:

In 2005, assessors valued the 559-acre Indianapolis Motor Speedway at $34.4 million for property tax purposes. According to the latest figures from the Marion County reassessment, it now has a market value of $170 million.

If the new assessment stands, the track’s annual gross property tax bills would increase fivefold, to more than $5 million, assuming tax rates remain constant.

Thousands of other Marion County businesses also would see extraordinary spikes in property values, according to an IBJ analysis of the latest assessment data submitted to the Indiana Department of Local Government Finance.

Gov. Mitch Daniels last year ordered the reassessment, saying he believes Marion County’s nine townships historically have done a poor job gauging the market value of commercial and industrial properties, leading their owners to pay unfairly low property taxes.

But IBJ’s analysis suggests the new effort also was plagued with problems. Many businesses saw huge jumps in assessments that appear difficult to justify. And officials have continued to revise the data, even though they were supposed to have submitted their final report to the state for approval last month.

“We still have problems,” Marion County Assessor Greg Bowes acknowledged. “There was too little time, frankly, to get everything done perfectly.”

In October, Portage, Mich.-based Manatron Inc. signed a $1.85 million contract to reassess Marion County’s 21,479 commercial and industrial properties. It delivered that data last month to the Marion County Assessor’s Office, which gave its report to DLGF in mid-February. Bowes then made further revisions with Manatron’s help and submitted a new report March 11.

The latest version assesses the county’s commercial and industrial properties at $20.4 billion, with $1.4 billion of the properties owned by tax-exempt organizations, such as hospitals. The $20.4 billion total represents a 41-percent increase from the $14.4 billion total listed for 2005.

One in four Marion County business parcels would see increases in valuation of 100 percent or more, according to Bowes’ latest figures. An unlucky 783 commercial and industrial parcels would increase more than 500 percent.

While a handful of business properties saw decreases or no changes in their valuations, nearly 90 percent increased. And much of the rise was concentrated among 2,208 business parcels whose assessments climbed at least $500,000. The Indianapolis Motor Speedway property was one of 178 parcels increasing $5 million or more.

Good luck recruiting businesses to Indiana -- and specifically to Marion County, which has largely driven and outperformed the statewide economy for the past decade -- when you treat them like that.

Then again, the Guv never really was focused on actual economic development. He just likes to cut ribbons and talk about creating jobs.

Trading Off: How Much Are You Willing To Pay For Property Tax Relief?

Abacus Do not buy into the Guv's tax plan talking points. There are costs associated with relief, and you will feel them, perhaps even more directly than you are currently feeling the property tax crisis. The Indianapolis Star reports:

Fewer police and firefighters. Fees for trash pickup. Fees to use a park's baseball diamond. Snow plowed less often. Higher income taxes.

Those are among the choices mayors across Indiana say they face if the property tax plan being debated by the legislature becomes law.

A proposal by Gov. Mitch Daniels that has been backed so far by the Senate and House would cap homeowners' bills at 1 percent of their home's assessed valuation, rental property at 2 percent and businesses at 3 percent.

It would mean more than $635 million less taken out of taxpayers' pockets in 2010 -- but that's also $635 million less for all local governmental units in the state, including schools, towns, cities and counties, based on the most recent estimates of the impact of House Bill 1001 by the nonpartisan Legislative Services Agency.

Overall, that figure is about 10 percent of the roughly $6.3 billion in annual property taxes collected statewide.

"This is just going to cripple a lot of communities," Richmond Mayor Sally Hutton said.

Her city would lose $1.95 million -- more than 11 percent of the city's property tax levy -- in 2010 under the plan as passed by the House.

And, she said, the lost revenues can't be made up by simply scrimping here or there.

"There's just nothing to give," she said. "We've all been under smaller budgeting for the last four or five years now."

Logansport Mayor Michael Fincher, whose city would lose more than $2.1 million in 2010 under the current plan, said he's considering such things as closing two of the city's three fire stations, charging for trash collection, eliminating school crossing guards and charging Little League and other groups that use the lights on ball diamonds.

He was among several mayors who questioned whether homeowners will, in the end, save anything at all if they end up paying higher local income taxes, which local governments might raise. There's also the higher state sales tax the plan calls for, along with potentially new local fees.

"If I save $200 (a year) on my property taxes and I now pay $20 a month for trash collection, 200 bucks costs me $240 (a year)," Fincher said. "It's not logical."

Do It Yourself: Figure Out How The Guv's Property Tax Plan Hits You

Abacus The Louisville Courier-Journal's Lesley Stedman Weidenbener gives us a lesson in her column today on how to calculate your savings and additional costs under the Guv's property tax plan:

"The school and welfare levies vary by community, so the impact of the plan would vary as well. That makes determining the effect on individual taxpayers quite difficult. And unfortunately, the governor's office hasn't released a list of county-by-county impacts.

"So it may be easier to just use estimates for this exercise, although you'll still have to look at your property tax bill and do a little bit of math.

"The governor's office estimates that Daniels' plan would cut the average homeowner's property tax bill by about one-third. So multiply the amount of your bill by 0.33. The answer is your estimated savings.

"However, if the resulting tax bill would be more than 1 percent of your assessed value (for example, $1,000 for a home assessed at $100,000), you would actually save more because of the cap Daniels has proposed.

"In that case, multiply your assessed value by 0.01 and then subtract the result from your current tax bill. The answer equals your savings.

"Now you have to figure out how much the sales tax increase would cost you. To do this, take a look back at your expenses during a typical month. Include what you spend on gasoline, taxable grocery items (such as pet food) and on household goods.

"Now, multiply that number by 12, to get a full year of expenses, and then by 0.01, the amount of the sales tax increase. The answer will be an estimate of your additional costs.

"Yes, that all takes a little work. But it could be worth it. You could find that the governor's plan works out great for your family. Or, you may determine that the proposed sales tax increase is going to cost you money."

Reality Bites: Guv's Tax Plan Sparks Plenty More Questions To Answer

Schoolbus_2 The Guv's tax plan sounded great as a six-minute speech on live television, but now that folks have had some time to think about it, they have a few more questions. The Fort Wayne Journal Gazette, for instance, wonders how state-funded school transportation would actually work:

"The commissioner of the local Department of Local Government Finance has the final word on the request, but the district would be forced to cut its transportation costs elsewhere if she denies it.

"Kathy Friend, chief financial officer for Fort Wayne Community Schools, said FWCS would have the same concerns about state transportation costs as it has about general fund costs – would there be an adequate rainy day fund? Would there be a formula to provide for annual increases in fuel and salaries?

"'We're not opposed to changing the way schools or transportation are funded, but there are still a lot of questions to be answered, and we hope to be included in those conversations to make sure the result is what is best for school districts and for the state as a whole,' she said.

"In truth, the state-prescribed formulas for school general fund and transportation costs often leave local school boards with choices that range from bad to worse. But any change that gives the state even more control over operations that now leave some discretion to local districts should be considered carefully. In considering the governor’s proposal, the General Assembly must weigh school officials' questions carefully."

Looking For Answers: WISH-TV Sifts Through The Property Tax Mess

WishtvIf you missed the WISH-TV investigative report on property taxes, which aired last night, you can -- and should -- read the transcript of the story here.

Hey, whaddya know? Despite the Guv's best efforts to blame everyone else, quite a few of the problems go straight to the top of his administration.

"Back in March, a whistle-blower showed I-Team 8 that problems went all the way up to the state agency that's responsible for oversight of tax assessments and tax rates, The Department of Local Government Finance.

"Experts said the agency doesn't have enough employees who are highly educated and well-trained. And it doesn't have the updated technology to make sure your assessments and tax rates are uniform and apropriate.

"The Department of Local Government has seen a revolving door of eight commissioners in the past 10 years.

"The DLGF Commissioner is responsible for signing off on tax rates for almost 3,000 taxing units in nearly 2,000 taxing districts. And on assessments by 1100 elected officials in 92 counties.

"Governor Daniels' appointee to head up the agency was Melissa Henson. Her state bio touts her expertise with the budgeting process, but it doesn't mention assessment.

"A letter from the Departement of Local Government to Marion County Assessor Greg Bowes documents that Henson approved the assessments, 'without verifying the actual data' even though she had many concerns about the accuracy of the numbers."

And then, of course, there's the small matter of the double-dose of ouch that taxpayers are going to feel when they get their revised 2007 bills along with their new 2008 bills early next year. The Guv, no doubt, will have thought of someone else to blame by that point.

Prepare To Pay: This Story Should Send Chills Down The Guv's Spine

WishtvHere's an ominous-sounding teaser for a WISH-TV special report on the future of the property tax situation:

"In Marion County, this year's final property tax payments are due Saturday. And, next year's bills are expected to be worse.

"Angry voters made a statement in Tuesday's election and voted Indianapolis's Mayor and several City-County Council members out of office.

"For taxpayers, it's like playing a game of monopoly, you roll the dice and take your chances.

"Whether you have a bungalow in Broad Ripple or a mansion on Meridian.

"Chances are your taxes will go up, school taxes, poor taxes, street repair taxes.

"I-Team 8 asked, 'Why would your efforts, after 30 years of Governors trying to fix the problem, why would yours be different?'

"Governor Mitch Daniels said, 'They'd better be different.'

"Tune in to 24-Hour News 8 at 11:00 p.m. The I-Team 8 investigation, Property taxes: Prepare to pay."

One thing that will be different is that the Guv will finally be paying attention to the issue after three years of pretty much ignoring it -- and making it worse through his own actions. But it remains to be seen whether the Guv will be able to answer to the business community, lawmakers and homeowners or whether he'll stamp his feet and refuse to compromise on anything.

More Input: IBJ Wants To See How Others Would Deal With Tax Woes

Writing The Indianapolis Business Journal calls the Guv's tax plan a good start but wants to wait and see what his bipartisan blue-ribbon commission has to say.

"The business community is up in arms over its higher cap, which could end up being a mixed bag for economic development. On one hand, business would be vulnerable to contributing a larger proportion of local property tax revenue. On the other, the cap would establish a maximum property tax businesses could pay. There’s something to be said for that kind of predictability.

"We'll have to be convinced that amending the caps into the state constitution, as the governor recommends, is in the best interests of the state. In the short run, however, property tax caps are good policy. And for local governments to live within the restrictions they dictate, local officials must be given every tool possible to cut the cost of government.

"That's why we're eager to get a look at the recommendations of the bipartisan commission. Its report finally could push legislators to implement the kind of restructuring the state has long talked about but has repeatedly failed to deliver."

We'll see how the Guv deals with the commission's recommendations. This, after all, is the group that he created to study the issue but whose ideas he overshadowed by releasing his own plan a few weeks ago. If past history is any indicator, His Mitchiness doesn't take kindly to constructive criticism.

Money Back: DLGF Releases Property Tax Rebate Amounts By County

TaxmanProperty tax rebates are on the way:

"A $300 million tax rebate plan approved by the legislature this year is moving forward, with state officials announcing today that they have certified the amounts counties will get to distribute to approximately 1.6 million Hoosiers with a homestead exemption on their property.

"The amounts of the Homestead Credit Rebate to be distributed in each county range from about $196,000 in Switzerland County to just above $51 million in Marion County.

"The next step in the process will be for county auditors to calculate the rebate amounts for each parcel. How long that might take was not immediately clear.

"However, taxpayers in Marion and others counties where reassessments have been ordered, or where budget orders have not been certified by the Department of Local Government Finance, will have to wait until the reassessment is completed or the budget order is approved before calculating how the money is to be distributed.

"State and county officials have said the Marion County reassessment is not expected to be completed until February.

"The refunds will be distributed as checks, but will have any unpaid taxes owed by the taxpayer deducted. The remainder will be sent to taxpayers, mortgagees or owners of record, with county auditors determining the recipients."

Here's the county-by-county synopsis of rebate distribution amounts from DLGF: Rebates By County

Executive Branched Out: Guv Holds Up Local Projects To Prove A Point

ConfusionThe Fort Wayne Journal Gazette knocks the Guv's lackeys for holding local projects hostage to prove a property tax point:

"The governor's effort to control property taxes might be well intentioned. But his administration should be following the intent of current law in considering projects now on the table. The General Assembly might well choose to clamp down on schools and libraries, but it's unfair for the state to do so until new legislation is in place."

The intent of the current law? This is a guy who thinks he is the law.

Tax Plan: Damned If You Do, Damned If You Don't Make It Permanent

Questionmark If TDW's reading this right, the Guv's tax plan can't pass into law because someone will sue, but the process of amending it into the Indiana Constitution would take [at least] two years. So, where does that leave us?

"At issue: whether the caps, welcomed by residential property owners but not by business interests, meet the constitutional requirement that taxes be assessed at a "uniform and equal rate."

"The caps would limit annual property tax bills to 1 percent of assessed value for homeowners, 2 percent for landlords and 3 percent for businesses, and are a key component of the tax reform plan unveiled last week by the governor.

"With the legislature's help, Daniels hopes to have the caps take effect in 2009, and he has proposed writing the limits into the state constitution. The earliest a change can be made to the constitution is 2010.

"Article 10 of the Indiana Constitution says: 'The General Assembly shall provide, by law, for a uniform and equal rate of property assessment and taxation.'

"'It does seem to me that when one class of property owners pays three times the amount of another, that is not uniform or equal,' said Indianapolis attorney Thomas M. Atherton, a constitutional law expert.

"Atherton, who was the lead attorney for the plaintiff in the St. John court case that led to sweeping changes in the property tax system in 2002, said he thinks it's likely that some business group will raise the constitutional question.

"'The fact that the governor acknowledged the need to amend the constitution is evidence, I think, that until it is amended, you have a serious constitutional issue,' he said."

Here's another question: Let's say no plan emerges by sine die next year. Does the Guv continue to freeze property tax rates in the areas most affected by this year's hikes? Does he have the authority to do that? Remember that next year, it's his political neck on the line.

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