As the county learns more about the reassessment and the state's tax restructuring, the more questions seem to arise.

Thursday, Kosciusko County Auditor Sue Ann Mitchell explained to the county council what she learned at a recent meeting in Indianapolis regarding tax increment financing issues created by House Bill 1001 and the inventory tax elimination.

For TIF at the county level, Mitchell said, several years ago Kosciusko County established the entire county as TIF districts except for towns and incorporated districts. A "TIF allocation area" for the Maple Leaf TIF CR 900N project also was created, but the assessed values before the project were set as the base assessed value for the area. Taxes on any increased assessed value is being diverted to the TIF district to meet the financial obligation to repay bonds issued to do the Maple Leaf CR 900N project.

In 2003, the school general fund taxes will be supplemented by a 60 percent property tax replacement credit by the state but the credit is not paid to the TIF district. This will be a reduction in revenue to the TIF district. An additional property tax will be set by the Department of Local Government Finance on all properties in the redevelopment district to make up for the shortfall in revenue because of the lost property tax replacement credit.

The tax is automatic unless the county commissioners decide to reduce the amount of tax or determine that no tax should be imposed.

In addition, as part of Kosciusko County's share of the state gambling money, the county will receive approximately $300,000. That money, Mitchell said, can be used to plug up holes in the TIF. If the county doesn't use the gambling money to plug up the holes, she said, the shortfall created will be spread out to everyone.

On Oct. 10, an H.J. Umbaugh representative will be in the county to review the impact of all this on the Maple Leaf CR 900N TIF project funding.

As for the inventory tax elimination, Mitchell said, out-of-state, manufacturing work-in-progress and raw materials will be exempt from taxation in 2003 (pay in 2004) with no action by the county council. All business inventory will be exempt in 2006 (pay in 2007) with no action needed by the council.

For 2004 (pay 2005) and 2005 (pay 2006) inventory tax elimination, the council must adopt an ordinance prior to Jan. 1. The council would be acting as the county income tax council with the majority vote. There is no way to eliminate the inventory tax for 2002 (pay 2003) because of the statute's wording, she said.

Deductions would be automatic for all inventory with no deduction application required.

The county council may increase the Economic Development Income Tax, to replace the lost revenue. This increase must be used to provide an additional homestead credit to offset the effect on homeowners.

Between January and April 2003, EDIT may be increased by up to 0.25 percent. The estimated required percent for Kosciusko County would be 0.16 percent. The elimination of the inventory tax without increasing EDIT merely spreads the tax obligation on property tax, according to Mitchell.

The elimination of the inventory tax would have a big impact on the total assessed valuation of the county. This could have great impact on small communities with a large manufacturer if their inventory is the major part of that taxing entity's assessed value. Mitchell said the elimination of the inventory tax would have a major impact on the cumulative funds of all taxing entities because cumulative funds are based on established rates. If the assessed values decline, the amount of funds raised would decline.

"At this point," said Mitchell, "I'm real uncomfortable with the financial impact this would have on the county." [[In-content Ad]]