SB 105, introduced by Sen. Charbonneau addresses the adjustment of debt by a political subdivision – generally allowing the distressed unit appeal board (“board”) to arrange for the governing of the political subdivisions affairs to get it out of debt, including through bankruptcy.
First, the bill changes the definition of an “economically distressed subdivision” from one that will have its property tax collection reduced by at least 5% to one that is designated as such by the board. Next, it reduces the board to a three member board consisting of the the director of the office of management and budget, the commissioner of the department of local government finance, and the state examiner of the state board of accounts. Significantly, I think, it eliminates members from political subdivisions, currently: one nominated by the Indiana Association of Cities & Towns, one nominated by the Association of Indiana Counties, and one nominated by the Indiana Association of School Superintendents. It also gets rid of the member appointed by the Speaker of the House of Representatives.
In addition to the fiscal body (as is the case currently) it allows the political subdivision’s executive or even its creditors (if they hold a large enough stake) to petition for the economically distressed designation. It eliminates the requirement that a petition to the board have a proposed plan to get the subdivision out of trouble. The board can impose the designation if the subdivision satisfies one or more of a list of indicators of troubled finances. (I do take exception to the one that says “The political subdivision has failed to make required payments to judgment creditors for thirty (30) days beyond the date of the recording of the judgment.” – I can see where you thought you’d win a case, get tagged with a big, unbudgeted judgment, and it takes more than 30 days to arrange the financing.) But, generally, the list consists of things that shouldn’t happen if the unit is functioning reasonably well: missing payroll, defaulting on bond payments, etc.
Once the designation is applied, the board appoints an emergency manager for the political subdivision that serves at the pleasure of the board. The manager is given enormous power, except the power to raise taxes. Otherwise, he or she is given the authority and responsibilities of both the executive and the fiscal body of the political subdivision concerning the adoption, amendment, and enforcement of ordinances and resolutions. He or she can unilaterally reduce salaries of employees, renegotiate union contracts, and generally seems to have unbridled power over the subdivision’s finances. He or she can also recommend to the board that the subdivision petition for Chapter 9 Bankruptcy Protection.
To me, this thing doesn’t at all strike the right balances. You have a small group of state officials – without anything in the way of input from local officials, even as consultants – who can take over a political subdivision without much second guessing. Then, their appointee can come in and wreck the joint with powers, individually, that seem to exceed those that were available in the aggregate to the people actually elected by the citizens of that subdivision.
Thinking of the damage some distant state bureaucrats could do to the good stuff we have going in Tippecanoe County gives me the willies. Fortunately, for the county – and, for the most part the other subdivisions – we’ve had some excellent officials who have done a good job meeting budgets; so maybe we’re not in too much danger. But, still – from my neck of the woods, the medicine seems too strong for the ailment.
As usual, Doug, you use your experience living in a white-bread university town to cloud your judgment.
From MY neck of the woods, this law is brilliant. Absolutely brilliant. I can’t say enough positive things about it, and as you know, I don’t say many positive things.
Look, the City of Gary is absolutely bankrupt. It has been before the DUAB two times, and is going for a third. They have no plan to get under the tax caps, and have so much as said that if forced to do so they will lay off everyone except police and firefighters (and they just laid off 34 firefighters before Christmas).
Gary has been on a 60 year slide, and the decline is accelerating. Yet nobody left has any idea or will to fix the problem.
But I guarantee you that the problem CAN be fixed, and the emergency manager has the powers to do so. Most importantly, he or she has the power to eliminate those contracts.
Why should the manager have more powers than elected officials? Because Gary is a Democrat town, and the public employee unions own the Democrat party. Nobody can get elected if they don’t cowtow to those unions. And those unions are never going to accept what needs to be done (cut their salaries and benefits in half, basically).
But the emergency manger can do that, and once it is done, Gary will be viable at the current tax rates. In fact, being in Lake County, they will go from having the highest taxes in Indiana to having among the lowest.
The only thing that I don’t see is a mechanism to revoke a municipal charter. In addition to a takeover and bankruptcy, I’d like to see the ability to turn a city into a town, or even an unincorporated area. I think that the depopulation of Gary is such that it would be much more viable if it were a town or unincorporated.
When I was writing that, I was mindful of the fact that you & I live in much different places. And it’s not *just* the university – though Purdue is obviously a very important part of Tippecanoe County. (One of the things I like about Tippecanoe versus Monroe County is that, while both are university towns, I think Tippecanoe has at least a little more balance with industry and some other things.)
But, I wonder if you could get a little more local input — not necessarily from the locality involved whose ox is about to be gored. Maybe have the board, or the organization in charge of appointing and supervising the manager, be composed of a mix of local officials across the state. Probably my beef is that I’ve just found working with Indianapolis a little frustrating over the years. (With some exceptions – I’ve found encounters with the AG’s office to be generally good and, of course, the folks at Legislative Services are the best ever!)
I absolutely understand what you’re saying about Indianapolis. But really, did you expect anything else? The whole universe revolves around Indy, doesn’t it? ;)
It is amazing to what extent everything is run from Indianapolis. But really, this law isn’t much different from anything else. Tax revenue, tax caps, liquor licenses, etc. etc. etc. There is very little local control.
I have been aggressively following this very issue and its’ implications as a resident here in the Miller Beach Community of Gary, In for the last five years. We, our taxpaying community residents, have FINALLY agreed to the vast majority consensus of the realty of disannexation. As soon as the City of Gary would file Bankruptcy, there would be a motion to file as a independent Town of Miller Beach, submitted to the appropriate State Authority granting our community this status. This would give our community the ability to form our government. Become responsible for our own emergency and administrative services which would vastly improve all that the City of Gary which couldn’t or in some circumstances, wouldn’t provide. The residents and I are all for the Senate Bill 105 and strongly suggest that serious consideration be given to its passage as soon as possible. I am at the end of my Presidents’ position for the MIG Board of Directors. I return to my status as a simple board member the next meeting at the end of January, but I ask that all Miller residence who pay their taxes to the never ending political pit called the City of Gary get out and vote this May. Stand up and be counted! I know I am.
Gil, I salute you and your plan. That sounds fantastic.
For the benefit of educating people like Doug, who live in their little university town bubble where everyone is reasonable, thoughtful, and kind, can you document what the taxes are in Miller Beach? With Gary tax rates being in the $10 per $100 assessed range as recently as 2007, how much have you been paying in property taxes on your home? How about the average Miller Beach person?
I think your experience should be eye opening for most people in the rest of Indiana, and will explain perfectly why this law is so needed.
Cut me some slack, Buzz. I come from the mean streets of Richmond with stops on the south and north sides of Indy and several years in the cornfields of Monticello before finally arriving in the soothing confines of Tippecanoe County.
Sorry, I should have had a ;) in there. My apologies.
Thanks Buzz, based on our research done by our group, the Miller Improvement Group (a 501(c)(3) Non-Profit Educational Org.) and compiling all the information obtained from the local township’s assessor’s office, the Miller Beach Community has paid 62% of all residential real estate taxes collected for all of Gary for the reported years. And that is as far as we can obtain information access at this time as was reported to me and our organization. Estimates conservatively place tax revenues for all three categories of taxable real estate at $12 million to a possible $15 million dollars per year. IT would allow the Town of Miller Beach, with strict financial discipline, to have its’ own government with all the responsibilities to go with it. And to be completely, and more importantly, transparent and responsive to all the residents. (est. population of Miller is 17,280 with actual data pending through the U.S. Census) One of the other largest civic organization within Miller Beach, the Miller Citizens’ Corporation
recently polled their membership of over three hundred plus on the issue of dis-annexation and 87% voted YES it was needed. I hope that your readers take a moment to comment on this. I would like to hear how they feel about this. Keep this up and thanks!