Luann Franklin, writing for the Northwest Indiana Times, has an article entitled “Property Tax Caps Devastating to Indiana Municipalities.” The story reports on the comments of the head of the Indiana Association of Cities and Towns, Matthew Greller.
Greller says that “tighten your belt” is easy to say, but with so much of a city’s budget being public safety and things like roads, there isn’t a lot to cut without backing your city into 19th or early 20th century levels of service. (To some, a return to the 19th century is undoubtedly a feature, not a bug.) The General Assembly has also apparently been taking a “state government small enough to fit in city hall” approach:
Greller said the Indiana General Assembly and the state government agencies also are negatively affecting local governments.
Of the 900 bills introduced during this legislative session, more than half “have some impact on local government,” he said. “The Indiana legislature is taking a very onerous, micromanagement approach. That will have to stop.”State agencies have encroached on “home rule,” limiting or taking over the powers of local governments, Greller said. In addition, state government has to certify municipal budgets, but never does so on time, he said.
Greller was also not amused by the recent revelation that the State had mistakenly retained $200 million that belonged to local government.
These municipalities are not hurting as much as you think. Right now, the biggest government scam of them all is hitting property tax payers. Assessed values of property, measured by those with no education, are increasing at meteoric levels 50-90% higher than actual market rate appraisals. Therefore, increased revenue is being generated. Furthering the scam is the slow appeals process in place. Therefore, it sometimes takes years for the actual 1% cap on market value to take place. Thus the local municipalities are not affected as much as you think.
Remember, the initial concept that ran along with the caps proposal was that local government could, and presumably would, increase local income taxes. The problem with the old pre-cap system was that no one seemed to be voting for increased takes – they just submitted a budget and the money appeared. Currently, the fear of actually voting for a tax increase is what’s harming local government, if you think it’s a harm.
Another thing to consider is that the local taxes (LOIT) have to be approved by the county government before they can be enacted to produce revenue for the municipalities. In my county, the county government is NOT going to implement a tax for the benefit of the municipality and take the heat for it when the county doesn’t really need the extra revenue. The municipality is hamstrung and short of raising revenue from fees (which they have been vigorously doing) there’s nothing else they can do.
The reality as evidenced by comments above is that local officials seek ways to not serve property owners (tax payers) well through variety of ways of handling things. Reality is the system as set up by the state does not make it easy for the locals to have much leeway. The state sets the method by which property values are to be determined and accepts or denys the data based the locals provide. As a side note is that the tax caps are definitely going to shift taxes assessed to business and farmers. The increase for farmers due to increased farm land prices + change in soil types by the state (that is revising soil types) + major increase in “productive index” for all soils will result in some farm land taxes to double or triple in the next 4 years. For example on a small farm I own the taxes increased about 33% this year over last year with for changes for next few years will more than double that increase. Again, the locals have no real say in these changes.
Brian, you don’t understand how property taxes work. There is a Levy and the unit cannot raise more than that levy. It doesn’t make any difference how high your AV gets – there is no more revenue from high AV’s then from low AV’s. The only difference is the tax rate.
Now, a higher AV does make more income available before the cap kicks in, but I wouldn’t call that more income – just income that would have been lost otherwise.
Furthermore, AVs are based on the 3 previous years sales. Housing market has been down for 3 years. Therefore, AV’s are still being influenced by high sales pre crash. They should (and are) start falling with the 2012 assessments.
Then the 2012 assessment is used to pay the 2013 taxes. So, while your AV may actually be going done one year your still paying taxes on the previous year’s higher AV.
Reuben, I do understand how property taxes work, so any insinuation otherwise proves you are an ignorant person. The bottom line is that my property taxes have gone up nearly 40% even with a 1% cap. So you can wax heavy about levies and such….bottom line is that local government is failing us.
Brian, the cap refers to a percentage of the value of your home. If the value of your home is assessed at $100k, then the cap sets taxes at $1k. Next year the State determines that your house is now worth $200k and your taxes go to $2k. That’s a 100% increase in your taxes even though the 1% cap is in place. That’s why a tax cap is such a joke on the taxpayers, the State still gets final say in the value of your house and if they need more money, well, the value of your house just keeps going up to get them the money they need. I’ve seen houses sell for 2/3 the prices they were going for 3 years ago, yet the taxes are still being based on the old selling prices. County government’s excuse is that “The State tells us how we have to do the assessments and ratifies our numbers”. It’s not local government that is failing us, the State government has it’s hand way to deep up local governments backside to escape the blame that easily.
But you’re still wrong…they don’t take any more money in because your AV increases. The tax rate is simply lowered. Again this may keep you under the cap, but the point is there is no additional income.
And there is nothing saying your tax bill can’t climb substantially. Assuming the tax rate in your unit is very low your tax bill may be well below the cap. You have a lot of room left for your bill to grow. For example, my tax bill is about $400/year while my AV is about $187K. My tax bill could increase 4.5 times before I hit the cap. But, still, if my tax bill went to 1,870 (1%) the unit would not bring in any more than the levy allows.
Local government is not failing us…the governor and the legislator failed us by trying satisfy the wealthy who had been underpaying for years and wanted to keep underpaying. It was feel good legislation that will do far more damage than good.
I’m conceptually ok with tax caps, but clearly the General Assembly acting as the city council for every municipality in the state is killing us. Also, the real issue I’m told in many cases is not the tax cap but the levy cap, which acts as a de facto spending cap at current levels for cities and actually incentivizes places not to ever reduce levies if they can (e.g., townships) because they’re afraid if they ever need to raise it back in the future they won’t be able to.
In any case, I would like to see the state out of the collections and distributions. Property taxes are raised to fund local concerns. What good does the state do with its involvement? We hear complaints about ‘donor counties’, inefficiencies, lost & found money. It’s absurd. We elect people locally. They are better in touch with local needs than the state, and local officials will be more accountable than a state rep or state senator who has 4 or 5 counties in their district. One-size-fits-all rarely does.
There are a number of property taxes that are not raised for local concerns but fund state obligations.
I guess they could institute a hybrid system, but probably not worth the hassle.