WINONA LAKE - Local government leaders met in Winona Lake with a representative of the Indiana Association of Cities and Towns Thursday to discuss Indiana House Enrolled Act 1001 and how it will affect Kosciusko County, local towns and other municipalities.
The state legislation passed by the General Assembly March 14 was aimed at property tax reform. It sets limits on how much local government can collect and makes changes in how some government services and projects are funded.
Ann Cottongim, associate executive director of IACT, said she has been travelling to communities throughout the state with a presentation called "1001 in Your Community" helping local officials digest the new 600-page bill."We're educating local units of government so they can know how the bill will affect their budgets," she said.
Cottongim reviewed the caps the bill puts on property taxes. The caps will be phased in over the next two years, and are set according to a piece of property's classification. In 2009, taxes on residential homesteads cannot exceed 1.5 percent of the property's assessed value; agricultural, long-term care non-homestead residential is capped at 2.5 percent; and all other real and personal property is capped at 3.5 percent. In 2010, the caps will be reduced to 1, 2 and 3 percent. While the caps may be good news to some property owners, local governments across the state will face shortfalls.
According to a report on HEA 1001 by law firm Baker & Daniels LLP, the Legislative Services Agency estimates that in 2010 the aggregate cost to local governments and schools of the bill's tax caps will be $524 million.
Cottongim explained the state will take on some levies currently paid for locally, such as local school general funds and child welfare, to offset some of the loss in revenue local governments will face, but for every dollar the state picks up, local dollars will be reduced.
Cottongim said, with traditional sources of revenue being pinched, local government units need to examine alternative revenue sources such as user fees, fines for ordinance violations, grants and donations.
"As we're driven away from local options, we're not going to be able to raise any more taxes," she said. "We're going to have to look at some alternatives."
She also said local governments need to find ways to reduce expenditures, which may mean downsizing projects, reviewing local purchasing policies and rethinking local funding for agencies in the community.
Governments in Kosciusko County will probably not face as tough a challenge as other counties throughout the state, Cottongim said.
"Here in Kosciusko County, you're blessed that it's not going to affect you as much as in other counties," she said.
According to IACT's estimates, HEA 1001's effect in the county will be measured in hundreds of thousands of dollars whereas other governments throughout the state will measure the impact in millions of dollars.
Thursday's meeting, organized by Winona Lake Clerk-Treasurer Retha Hicks, gave local officials a chance to get more familiar with HEA 1001 and to talk together about how they can meet the challenges the bill will present.
County Councilwoman Charlene Knispel said she found the meeting to be helpful because of the complexity and wide-reaching effects of the state bill.
"Anytime we can get someone who can sit down and explain some of this stuff, it's good," she said.
Officials from Winona Lake, Warsaw, Syracuse, Akron, Etna Green, Silver Lake, Sidney and Harrison Township attended the meeting.
Winona Lake town councilman Jim Lancaster said getting local leaders from the various government units together was part of the goal of the meeting. Lancaster said meeting the challenges posed by HEA 1001 is going to take cooperation countywide.
"The idea is to create more collaboration," he said.
Kenneth Koontz, Sidney Town Council president, said he found the meeting helpful in confirming that his town is ahead of the curve. Koontz said the Sidney council already made cuts in anticipation of the new law.
"Things are coming along real good," he said. "We're not going to be cut too much."
Winona Lake Town Councilwoman Joy Lohse said, though it presents challenges, HEA 1001 may be a positive thing for local governments.
"I think it will hold counties in Indiana very accountable for their ongoing planning, zoning and prioritization of projects," she said.
