The local homestead credit is applied to homestead property tax bills. The money used to supply the credit comes from local income taxes. It costs more in income tax money than it saves taxpayers in property taxes, because so many property taxpayers have already hit the tax caps and can be billed no more than the 1% value of their homes. I'll give you graphs and numbers below, but suffice it to say without numbers, that the City/County government stands to reap millions of dollars and those Townships that retain their fire departments stand to gain in tens to hundreds of thousand dollars if the homestead credit is eliminated. The remaining Townships, the School Districts, and three municipal corporations (IndyGo, the Library, and Health & Hospitals) all stand to lose anywhere from $50,000 to nearly $1 million if the homestead credit is eliminated.
The expansion of the old IPD taxing district would still collect the same total amount of money - but more property taxpayers would pay a share. Therefore the tax rate in the old city limits would go down and the tax rate outside would go up. Through the magic of the property tax caps, this would cause the City/County to again reap millions more from this change, IPS would see millions more, and Center Township along with the three municipal corporations would see hundreds of thousands more in revenue. All other Townships and School Districts would see a drop in revenues from minimal to just over $700,000.
If you do both - eliminate the homestead credit and expand the IPD taxing district - you get a mixed bag of effects because the list of winners changes with the two.
The administration is basically holding forth the notion that those who stand to lose revenue through these changes, will make up for the losses because other revenue they get is scheduled to increase and would absorb most, if not all, of any losses. This ignores two facts - one is that the School Districts have already signed teacher contracts obligating them through June of next year. These contracts were crafted in anticipation of the increased revenues. The other fact is that the City/County will also see an increase in revenues and can, using the same logic, forgo both the homestead credit elimination and the expansion of the IPD tax district.
Below are some charts showing the impact of eliminating the homestead credit, expanding the IPD tax district, and doing both, on most of the taxing districts in Marion County. I have uploaded the raw data supplied by Jason Dudich, the City Controller, to Google Drive (here and here) should you want to look over those districts I've not followed below. The data for the elimination of the homestead credit is from the Policy Analytics presentation to the Review Commission.
City/County Government
The City clearly finds advantage in any combination of changes. It is the big winner.
Townships
Center Township and the westside Townships see the real 'action'. Center gains if the tax rate in the old city limits goes down, by reducing the number of taxpayers who are at the property tax caps - thereby increasing the amount of property tax revenue that becomes collectable. The westside Townships are the only three that retain their fire departments. They receive income tax revenues and thereby gain when income tax money is freed up by the elimination of the homestead credit. They lose, however, property tax revenue if the old IPD tax district is expanded, because the tax rate will go up in their district and more folks will hit the tax caps - decreasing the amount of collectable tax revenue. The least difference for these Townships is if both the elimination and the expansion move forward, or if neither is enacted.
School Districts
I show the school districts with and without IPS, as that district's gain dwarfs the losses of any one of the other districts. IPS gains only with the expansion of the IPD tax district. The other school districts lose any way you cut it. Beech Grove and Speedway have the lowest property tax dependence and thus the lowest impact from any proposed changes.
Municipal Corporations
Last but not least is the impact of the elimination and expansion on the Library, IndyGo, and Health & Hospitals. These three depend upon both property tax and income tax revenues, but mostly the former. They lose money if the homestead credit is eliminated and gain if only the IPD tax district is expanded.
There is no threading the needle here; if any changes are made, some taxing district will lose and some other will win. Clearly these proposed changes are being proposed only because they increase the revenue to the City/County government no matter what combination is enacted. But, the impact and fallout from changing the status quo is quite real. The elimination of the homestead credit has had time for its impacts to be considered and weighed. The full impact of the expansion of the IPD district and the full impact of the combination of changes, have not been granted the same study. That will be unfortunate, to say the least, should any Councillor vote on these matters without reviewing the exact impacts for themselves.
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2 comments:
So if we eliminate the local homestead credit and / or expand the IPD taxing district the city wins and everyone else loses?
Well Jon, the City wins not matter what. But, its a mixed bag as to which units gain and which lose, depending upon the assortment of changes that are made.
The administration is trying to make it all sound so simple. But, it is not.
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