Representatives of Reedy Financial Group presented nearly two hours of information to the Kosciusko County Council and Commissioners during a joint meeting Tuesday.
The county hired the financial consultant company for six months in 2023 and for up to 12 months this year at $5,000 per month to assist the county with financial and strategic planning.
“We, basically, had been engaged last year around budget season to help out with long-term planning and the budgeting process,” said Branden Robbins, Reedy Financial partner, in his opening remarks. “We talked about the things and the timeline and some of the items that we would start to cover in a complete fiscal year. We’re just over six months into that, and wanting to get into kind of the higher educational component of sort of where the funds are going to come from and how we’re currently allocating things. Maybe some opportunities that are out there, the fiscal environment. And then we’re going to tie it all back to where you guys kind of ended the year in ’23 - big picture stuff. This is not the day-to-day data-entry level type of stuff.”
The data provided by the county auditor to Reedy is compiled into the long-term plans for the county.
Robbins said Tuesday’s discussion was all high-level “big picture” information, but they’d like to start to dig in and talk about next steps by the end of it.
He told the county elected officials that they have a really good structure for their budget. “I don’t think you need me to tell you how wonderful (of a job) your auditor’s office does, for one, and the fiscal side of this thing. You have a lot of assessed value. You have low tax rates. You’re a great place to live as far as counties go. You have good cash flow. The key to what we’re going to try to get to here by the end of this discussion is, where do we go next with that, as far as the future planning?” Robbins said.
Legislation
One of the things that Reedy Financial does is keep track of Indiana Senate and House bills that are being proposed, including ones that affect counties. If any gets passed that can potentially be positive or negative for the county, he said that would be sent out to them.
“There’s some legislation on the RBC funding for police and fire expenses,” he said as an example. “You can now utilize your TIF (tax increment financing) to help fund public safety. Operations and (capital).”
Senate Bill 129 offers reimbursement if a police officer gets training from one employer and then leaves for another, Tyler Lewis, Reedy Financial consultant, said. “So if they leave, you don’t lose your money. You get reimbursed by that other county,” Robbins said, if the bill comes to fruition.
Property Taxes
Looking at the current property tax environment, Robbins said, “What we’re seeing is tax rates going down, and you guys have a pretty low tax rate so you may not have constituents coming to your meetings and asking what’s going on. But tax rates are going down, but taxpayers are paying more.”
Essentially, what’s happening, he said, is that the “inflationary adjustments we’re seeing on homesteads are getting us to market value. So, essentially, what your home should sell for. So what happens is, they inflate that AV on homeowners and we’re seeing property taxes driven down because our AVs are going up, but yet those homeowners are paying more because their values are going up.”
He said the state passed legislation in 2023 that “basically said, ‘hey, homeowners, we’re going to give you higher deductions.’ So you’re seeing that in play now, so what we’re seeing is gross assessed values going way up, but our net assessed value is staying somewhat flat.”
He said they’re keeping an eye on that, but that could definitely impact the county’s tax rates. If the AV stays flat, the net assessed value stays flat, “your tax rates potentially could go up a little bit. Again, not a substantial issue. You don’t have a lot of tax gaps, very little in fact.”
Revenue sources for the county includes property taxes, income taxes, state and federal and other sources.
“But the first, and probably the most significant property tax, would be your maximum levy funds. This is the statewide average growth quotient (AVGQ), it’s a six-year non-farm makeup,” he said. “It’s very interesting that our property tax distribution growth, year over year, is restricted by income averages. So we’re basing our property tax growth on income - on what people in the state of Indiana, on average, across the board are doing over a six-year period, not including farm income.”
He said that growth quotient got further restricted due to House Bill 1499 that was passed last year. He said it’s now basically capped at 4% for 2024 and 2025, and it was 5% in 2023. Robbins said he hopes that changes because “people and communities like your guys’, your growth is much more significant, and it’s keeping your tax rates artificially depressed.” He said the county isn’t able to grow its revenue as much.
Robbins said the maximum levy funding source is what the county’s primary operational funds are funded from. “But it is a pot of money that grows by that 4% and it will not grow more than that year over year.”
Of Kosciusko County’s 2024 maximum levy allocation, the bulk of it is about $12.4 million in the general fund. Health is just short of $1 million, with reassessment at almost $300,000 and cumulative bridge at about $800,000. To add to one of those funds, it has to take from one fund.
Tax caps and the Circuit Breaker was another area Robbins touched on. Legislation on circuit breakers was implemented in 2008 and phased-in fully by 2010. “What it said was our taxpayers can not pay over a certain percent of the gross value of their property. It’s 1% for your homeowners, 2% for other tax classes - your agricultural and non-residential, your rental properties. And then 3% is the commercial, industrial and all others,” he said.
If a person buys a $100,000 home in gross AV, they can not pay over $1,000 in taxes on it.
“So if I have a $2 tax rate, and I should be paying $2,000, the units of government in my community are not collecting that extra $1,000. I only pay the $1,000. This extra $1,000 is just uncollectable,” Robbins said.
The same $10 million levy prior to 2007 now only nets $9.4 million. The average Circuit Breaker of all Indiana counties in 2023 was 6.03%. The Circuit Breaker is a huge constraint for some communities, he said. Kosciusko County’s is about 1.6%, “it’s nothing,” he said.
Councilwoman Sue Ann Mitchell said the county only has eight units with a tax rate of over $2 per $100 of AV. “And that’s a contributing factor. That $2 tax rate is causing people to not be over the cap, and therefore we’re not losing money,” she said. “Warsaw city, I believe, has the largest loss because they have so much more and they have a greater tax base.”
County Treasurer Michelle Puckett said that while the city of Warsaw’s Circuit Breaker loss is huge, it’s even larger for Warsaw Community Schools.
“So Warsaw Schools, Warsaw city would be the two biggest losses in the county,” she said.
Local Income Tax
Moving on to the local income tax, he said that shifts with inflation. He said people who work and get a paycheck pay into whatever the county’s income tax rate is.
“It goes into a pot at the state for all 92 counties. Everybody has one. Kosciusko County has a sum of money in this pot, and it has to have a balance of at least 15% - basically, a distribution value, the amount they distribute back to the county to spread out among all the units,” Robbins said.
Income taxes are certified because they’ve been collected 18 months prior to distribution. “This has become the second major source of revenue for funding our operations and capital inside our communities over the years,” he said.
Of the 92 Indiana counties, he said Kosciusko is the 83rd lowest income tax rate, “which is great.” The lowest total rate is 0.5000% for Porter County (92nd), with the highest being Randolph County (1st) at 3%. The average total rate is 1.8346%.
TIFs
Matt Frische, manager with Reedy Financial, talked about TIFs in general.
“TIF is a financing tool that we can utilize to facilitate economic development. Essentially, we are going to identify parcels that we’re going to capture assessed value based on future developments,” he said. “... Key here though is we are not taking away dollars from overlapping units. That is an error that’s been around. We’re creating a new development and we’re capturing dollars off that new development - direct efforts of what we’ve done at a county level.”
A Redevelopment Commission is the governing body of the TIF allocation areas.
County Commissioner Cary Groninger asked, “Have you seen where, in a TIF area, say an adjoining county and municipality, where there’s a way that those TIF funds could be shared? Let’s say a county and a municipality are investing in infrastructure, investing to make a development happen. One may need utilities for one, and they may need roadways from the county, whatever, they’re working together. Is there a way that if that municipality would annex that, the county would still be allowed to receive some of that TIF funding and be able to pay back whatever investments they made?”
Frische said it sounded like they were “flirting with the idea of a pancake TIF” and legislation was passed a few years ago to ban pancake TIFs.
“The way it works currently is, if you have that TIF area, and you have debt payable ... if debt is payable by those revenues, they can not come in and set a TIF on top of it. It is the county’s TIF and it stays that way,” Frische said. “Now if you were to have an allocation area that didn’t have debt payable by it, it was just right outside the municipality, they could annex it, then they could take over that TIF by the county.”
Councilwoman Joni Truex said, “The problem with this parcel that everybody’s talking about, without saying, is that there’s a 10-mile difference between where this is and the municipality that we need to supply the water, and we’re all - not only the people in this room but people in other organizations and other attorneys - are looking for workarounds. There’s a whole lot of people trying to figure this out real quick, and we don’t have a solution yet but we’ve gotten some ideas and we’re going to try to run them by and see if they’re legal. That’s the key word.”
Commissioner Brad Jackson asked if a town ran water out to a property that the county had a TIF on, would they be able to enter into some kind of agreement to be able to get the money back to the town for supplying water? They’re not annexing, but are possibly supplying water.
Frische said based on the scenario Jackson outlined, “I would say that there’s definitely a way to get a deal done because at the end of the day, the purpose of TIF funds, the use of TIF funds, is to benefit the allocation, the economic development. We are paying for services. We need water at our site. Absolutely, I think that there would be a way to say that these revenues are being used to benefit our allocation area or our economic development area.”
As part of his wrapping up the meeting, Robbins showed a graph of the county’s 2024 budget, which totals $78,857,172. Of that, 43% is other services; 38%, personal services; 10% supplies; and 9% is capital outlays.
“A lot of these meetings will never be this educational formated. From here on forward, they will be very focused on the topic at hand. We wanted to stay high-level, big picture, talk about you guys, talk about the environment, talk about the things that impact you, and we hope we’ve left you with some good information,” he stated.