State Legislature Meddling in Indy Yet Again

Last night began the City-County Council committee work to review, amend, and adopt the 2016 budget.

There was one particular item that got a bit of discussion that was quite interesting.

You will recall that the last few budget sessions have been punctuated with an ongoing fight over whether or not to eliminate the local homestead credit on property tax bills of homeowners.  The Democrat controlled Council has refused to eliminate it all at once and even refused to phase it out.

Well, it seems the Ballard Administration has once again turned to the State Legislature to change the rules so that Ballard can get his way.

Currently, income tax revenue (COIT) is used to fund the local homestead credit.  According to Council Counsel Fred Biesecker, with HEA 1485, COIT can no longer be used in this manner after January 1, 2017.  If the Council wants to continue the local homestead credit (LHC) in 2017, it will be forced to RAISE a NEW TAX.

The LHC costs $10 M, but only $2 M actually makes any difference in homeowners' property taxes, since so many of us are being protected by the tax caps.  But, the remaining $8 M doesn't just evaporate, it lessens the tax cap/circuit breaker impact on the many school districts in Marion County, IndyGo, Health & Hospitals, and the Library system.

By upending the current funding source, the Republican controlled State Legislature is reaching into what will likely be a Democrat controlled Mayor's office and forcing it to RAISE TAXES to maintain the status quo.  Of course, if a Republican were to somehow win the election, the Legislature left itself a year to 'correct' course so that no such dilemma would have to be faced by a Republican.

The upshot is not just having to raise a new tax - it also includes having to wade through the weeds and convince the public that it is somehow wise to raise taxes by $10 M so that members of the public can benefit by $2 M.

This is clever and cursed at the same time.

Whenever a local problem is brought to the State Legislature by a Republican, the solution is to do whatever makes the Republican's political life easier.

Whenever a local problem is brought to the State Legislature by a Democrat, the solution is to give them the authority to raise taxes.

And now we see that when a Republican is likely to be succeeded by a Democrat, the solution is to delay the authority to raise taxes until the Democrat is seated and crafting his first budget.

Ballard Tax Revenues About $100 Million More Than Peterson Had

What can you say about the Ballard Administration's request to drop the local Homestead Credit (increasing taxes on most property owners and foisting higher circuit breaker penalties on schools, IndyGo, and the Library system), increase County Option Income Taxes, and a new proposal to increase the stormwater drainage fee to property owners - when Ballard's combined property and income tax revenues have been $70 million, $100 million, and more, than Peterson enjoyed in his last two years in office?  Why, you have to wonder where it all went. 

The spate of proposed tax and fee increases sent me to City budget documents to pull out the property tax and income tax revenues enjoyed by the City/County government from 2006 through 2013.  These numbers are 2006 actual, 2007 actual, 2008 actual, 2009 actual, 2010 actual, 2011 expected from the adopted budget, 2012 expected from the introduced budget, and 2013 expected from the adopted budget.   Circuit breaker penalties began in 2011 and are reflected in the revenue numbers listed below.  In 2012, the State returned $46.6 million in additional income tax revenue to the City, for errors in 2011 and 2012 - this windfall is accounted for in 2012, as that is when it was received.

 

 

 

 

Peterson's last two years in office were 2006 and 2007.  He increase the income tax by instituting a Local Option Income Tax (to reduce, somewhat, property taxes) and a Public Safety Tax, with the expectation that he would hire 100 additional police officers and handle the ever-growing pension obligation.   So, he handed Ballard an enriched budget.  In fact Ballard has enjoyed combined property and income tax revenues $70 million to $100 million more than his predecessor.  In 2010, I do not know what happened, but there was an additional windfall of about $150 million.  One also has to note that in 2009, the State took over a number of expense obligations; the aforementioned pension being one, and a $100 million annual obligation for the Family and Children's Fund that was supported by property taxes, being another.

 

The new City Controller, Jason Dudich, anticipates an additional $20 million in tax revenues for 2014.

 

The City is also just sitting on $80 million in a 'stabilization fund', that could help us eke by with 'only' $20 million more.

 

The revenue impact from tax caps, much focused on by the Ballard Administration, was easily compensated for by Peterson's income tax increases.  So, where did the money go?  And, why can't the City handle its current budget obligations with $100 million more in revenue, and fewer obligations, than Peterson had?

Dust Up - For Reasons Unknown, But I Speculate Anyway

I have the greatest admiration for Councillor Brian Mahern, but last night he flubbed.

The Rules committee began their consideration of Prop 316, which would implement the recommendations of the TIF Study Commission.  After a thorough and really well done overview of the findings of the Commission, Councillor Bob Lutz introduced an amendment that would strike the very last part of Prop 316:

(d) Any proposal creating or expanding a TIF allocation area must be approved by a standing committee of the council before it can be considered for adoption by the full council.

The discussion, which actually preceded the motion to amend, revolved around current Council rules and how the proposed change would impact the ease with which the full Council could call a TIF proposal out of committee.  Currently, if a committee kills or votes down a proposal, the full Council can call it out of committee by the vote of a simple majority; or 15 votes.  This change would require the suspension of the rules in order to call a TIF proposal out of committee, which requires a 2/3 vote; or 20 votes.

After the motion and a second, Mahern refused to take a vote and asked to postpone the proposal until the next meeting of the committee.  He said postponing would allow time to discuss this amendment as well as one Councillor John Barth would be introducing.  He noted that Barth's amendment was only received that afternoon.  There was no second to his motion.  Mahern then tried to move off Prop 316 and on to the next agenda item.  After some brief, heated discussion, a recess was properly motioned and voted on.

After the recess a vote was taken on Lutz' amendment and approved by a vote of 5-1, with Mahern being the lone dissenting vote.  Then there was a motion and second to postpone further consideration of Prop 316 until the next meeting.  That vote was 4-2, along party lines.

I got no indication from the cheap seats why Mahern was so intent on getting the proposal to the next meeting.  While I would welcome a requirement for a super majority vote on any TIF proposal, it didn't seem to rise to the occasion of clearly violating parliamentary procedure in order to avoid a vote.

Barth's amendment was available at the Secretary's table.  This amendment would gut the entire proposal.  Barth is promoting his own TIF for his own neighborhood - Prop 291; the Mid-North TIF (see "The Mid-North TIF -- Developer Driven and Sans Critical Financial Details").  He introduced his proposal at the last full Council meeting.  Prop 316 was introduced at the same time.  One might expect, therefore, that any implementation of the recommendations of the TIF Study Commission would not apply to the Mid-North proposal.  But, Prop 291 was not placed on the Metropolitan & Economic Development committee agenda for Monday night, and it will not be until after the next full Council meeting that the committee would take it up.  So, as of yesterday morning it looked as if the TIF recommendations would indeed apply to the Mid-North TIF.  I can't read minds, but it is very suspicious that Barth introduced his amendment just hours before the meeting and that amendment would gut the entire list of recommendations contained within Prop 316.

Besides a technical correction, Barth's amendment would add one line to section (b) of Prop 316.  Here is (b) with the added sentence underlined:

(b) The factors set forth in subsection (a) [which enumerated the recommendations] are not exclusive, and the council may consider any other factors it deems appropriate in exercising its discretion to approve or disapprove proposals under I.C. 26-7-15.1(9)(a).  Likewise, the absence of any factor or part thereof does not limit the council's discretion to approve or disapprove a proposal.

With that last sentence included, none of the recommendations would be securely implemented.  The administration, or any that follows, could continue its pattern of withholding key financial information from the Council.  That information is necessary to a realistic look at the TIF being proposed.  Without that information the Council cannot make an informed decision and it cannot carry out its duty to review and vote to approve or disapprove as required by law.

TIFs do not generate free money, as many continue to believe.  TIFs have consequences, as many continue to avoid believing.  TIFs always caused increases in property tax rates.  Now they increase substantially the circuit breaker penalty caused by the property tax caps.  Property tax caps that were voted on by the people.

In this age of property tax caps, it is time for the Councillors to learn about the reality of TIFs. It is time to act as the fiscal body of our City that is different from the Mayor's office and that has a distinct role and responsibility.  It is time to demand full disclosure on proposed TIFs so that a reasoned decision about TIFs can be derived.  It is time to implement, not blow off, the Council's portion of the TIF Study Commission recommendations. 

TIF Fact #7 --- 33.3% of Taxable Property in Center Township is Contained Within a TIF - How Much Is Prudent?

I sent the following email message to all City-County Councillors, select media representatives, and Senator Luke Kenley.

At some point too much taxable property contained within TIF districts is too much and will cause irreparable harm to the taxing units and the services they can provide due to a crippling increase in circuit breaker penalties. 

33.3% of all taxable property in Center Township is contained within a TIF.

How much is prudent?

Have you asked for the impact of expanding the consolidated downtown TIF by another 716 acres (1.1 square miles) on the percentage of taxable property in Center Township contained in TIFs - as well as a projection over the next few years of that impact?  Do you know how much is prudent?

The Council should demand full disclosure before Prop 15 or any other TIFs are considered.  Otherwise you won't know what you are voting on.

Citation : TIF Study Commission Report, Appendix 2, part 1 - page 4

TIF Fact #3 --- TIFs Cause Higher Property Taxes For Everyone And Cause 41% of Circuit Breaker Penalties To the Taxing Units

I sent the following email message to all City-County Councillors, select media representatives, and Senator Luke Kenley.

For the pay-2012 property tax year, Marion County TIFs combined to cause increased property taxes throughout the County and caused 1/3 of the circuit breaker penalty imposed on schools, libraries, and other taxing units.

From the TIF Study Commission:

For pay-2012 , all of Marion County's TIFs combined caused

$56 million in increased property taxes to taxpayers

$43 million in increased circuit breaker penalty to taxing units

The total circuit breaker penalty to all taxing units in pay-2012 was $105 million.

Have you asked what impact the proposed expansions of the consolidated downtown TIF are projected to have on higher property tax rates and circuit breaker penalties?

The Council should demand full disclosure before Prop 15 or any other TIFs are considered.  Otherwise you won't know what you are voting on.

Citations : TIF Study Commission Report, Appendix 2, part 1 - pages 6 and 25-26

TIF Study Commission Meeting 2 - TIF-a-licious

Hard to imagine, but the second meeting of the TIF Study Commission was even better than the first.  I found it provided some hard numbers to flesh out the concept of our TIFs, brought together some variables that impact one another, and exposed the 'language' problem when discussing such arcane (but important) tools of government.  You could see new avenues for exploration opening as the discussion moved along.

I have to say that the City and County are being impressively well served by this group.  All are serious; all are weighing in with important things to say or ask; all have done their homework.  The agendas are chock full and the exchanges are riveting.  The topic is not being taken lightly or merely skimmed.  These guys are hip deep in real, meaty issues.

I don't want to simply report what was said.  I believe that we need a community discussion as well as a policy maker discussion of TIFs - how long should they live - on what should their funds be spent - how should they be prudently structured - what kind of oversight should be in place - how public input can be improved - how they can better serve their stated purpose - and more.  So, at this point at least, I want to recraft some of the information that was put forth to frame the important concepts that are falling out of these meetings.

One important idea that bubbled up last night was the use of language (my Anthropology friends will like this).  It is said that the Inuit language has hundreds of words for 'snow'.  While we feel that 'sleet', 'snow', and 'hail', coupled with the adjectives 'wet' and 'fluffy', suit our needs nicely.  There is purpose in a TIF technical language, but it can exclude information from those who do not understand the language, and it can confuse all when common English and the TIF technical language share a word, but use it to mean different things.

I am going to avoid as much TIF jargon as I can - mostly so I don't misuse it.  However, I do want to paint the concepts so that we can all partake in this important conversation.

The first concept, and the topic of this entry, is that property tax rates, property tax revenues, and tax caps are all affected by TIF districts in a complex way.  Sometimes it is useful to look at the extremes in order to illuminate the trends.  So, lets look at the effect of TIFs from two extremes - all or nothing.

(This falls out of the information presented by City Controller, Jeff Spaulding, for those who have or will watch the WCTY replay.)

Before the tax caps --  If there were no TIF districts, the total value of Indianapolis/Marion County property would be used to determine the property tax rates.  The rates would be the lowest they could be and each property owner would pay the lowest amount needed to fund the services of the City, Library, IndyGo, Township (with and without fire), and schools. 

Before the tax caps -- if everything but my house was in a TIF district, the value of my property would be used to calculate the property tax rates.  My bill would be $1 billion.  But, don't be laughing at me.  My tax rate would apply to every parcel in the TIF district - so you'd be paying quite a large sum as well.  However, only my tax payment would pay for City services and the Library and IndyGo and the Townships and the schools (jargon: the taxing units).  Your payments would go to service the TIF bonds and projects being funded out of the 'everything but Pat's house' TIF.

After the tax caps -- If there were no TIF districts, the total value of the Indianapolis/Marion County property would be used to determine the property tax rates.  The fewest number of taxpayers would max out and hit the tax caps; mostly in areas where the school district has oversized debt.  These folks are protected by the tax caps.  The rates would be the lowest they could be and each property owner would pay the lowest amount needed to fund services.

After the tax caps -- If everything but my house was in a TIF district, the value of my property would still be used to calculate the property tax rates.  But because of the protection afforded by the tax caps, my bill would be $2000.   (jargon: my tax cap credit would be $999,998,000)  All the services provided by the various taxing units would be hurt or shut down completely (the taxing units all have other sources of revenue - but property taxes is a large fraction for each unit).  The calculated property tax rate would apply to the 'everything but Pat's house' TIF, and like  me, every property owner would receive protection from the tax caps.

Bottom line -- before the tax caps were in effect, increasing the total number or size of TIFs would cost all taxpayers more money, but the taxing units would still receive all the revenue they qualified for.  Now that the tax caps are in effect, increasing the total number or size of TIFs cost taxpayers more money until they hit the cap (and are protected by it), but the taxing units do not get all of the property tax revenue they requested.  Their property tax revenue is reduced by the same amount as the tax cap protection afforded the taxpayers.  (jargon: the tax cap credits provided to the taxpayers are subtracted from the property tax revenue that the taxing units hoped to receive.)

In 2011, the total property tax revenue requested by all taxing units was $1.057 billion.  The tax cap credits totaled $134.5 million, or 12.7% of the amount requested.  So the taxing units 'only' got $922.5 million.

Certainly, TIF districts aren't the only reason taxpayers hit the tax caps.  But, TIFs are the topic of discussion right now and as they grow, they cause an increase the number of taxpayers hitting the tax caps, and they therefore cause a decrease in the property tax revenue that actually gets to the taxing units to spend on services for the public.

Spaulding noted that if all TIF districts were dissolved (not going to happen; just hypothetically speaking), an additional $43 million of property tax revenue would flow to the taxing units because the tax rate would go down and fewer property owners would hit the tax caps.  Taken together with the 2011 tax cap credits mentioned earlier, it can be calculated that the TIF districts in Indianapolis/Marion County cause 31% of the tax cap credits.   Some call the tax cap credits a 'problem' to be solved, while others call it 'protection' to be applauded.  I obviously fall in the latter camp.  But, at the end of the day, it is obvious that the expansion of TIF districts or the increase in the size of existing TIF districts has a notable impact on the tax caps and the reduction of tax revenue that the government has to spend on needed services.

Why I'll Vote "YES" On The Tax Cap Question

There is a public question on the back of this year's ballot. It would put the property tax caps into the Indiana State Constitution. Here is how the question is written:

PUBLIC QUESTION #1

SHALL PROPERTY TAXES BE LIMITED FOR ALL CLASSES OF PROPERTY by amending the Constitution of the State of Indiana to do the following: (1) Limit a taxpayer's annual property tax bill to the following percentages of gross assessed value: (A) 1% for an owner-occupied primary residence (homestead); (B) 2% for residential property, other than an owner-occupied primary residence, including apartments; (C) 2% for agricultural land; (D) 3% for other real property; and (E) 3% for personal property. The above percentages exclude any property taxes imposed after being approved by the voters in a referendum. (2) Specify that the General Assembly may grant a property tax exemption in the form of a deduction or credit and exempt a mobile home used as a primary residence to the same extent as real property?

The main reason I will vote YES, is that the property tax caps do confer significant protection to property owners and posting them in the Constitution would provide protection to the tax caps themselves. To undo the tax caps, the same multi-year, multi-vote, public process would have to be engaged. This increases the likelihood that the tax caps will remain unscathed for years to come.

Another reason is that the State took over many obligations that had previously resided with property tax payers for schools and cities. In return, they increased the sales tax by 1%, and projected the net effect to the State would be an increase in revenue - even after accounting for the increased obligations. Back in 2008, the estimate was for an net extra of $128 million a year. The State should be encouraged to share more of the revenue with local cities, libraries, etc. But that is an independent course that should be taken regardless of whether or not the tax caps become incorporated into the State Constitution.

Some like to say that the tax caps don't stop increases in Assessed Value of your property. And, that is true. But, the assessed value is supposed to reflect market values. I know our house lost assessed value for the past two years running. Again, the tax caps do not exclude any discussion of also limiting assessed values, say for as long as one owner retains the property.

The tax caps may not be the entire solution to the onerous property tax burdens we saw a couple of years ago. But, they are a mighty step forward in assuaging that burden. I shall be voting YES on the public question, as that is the best route for keep the burden as low as possible for the forseeable future.

2010 Tax Cap Credits -- Municipal Corporations

Now we move on to the municipal corporations, those units of government run by a separate Board, but operated in part or in whole with taxpayer funds. The Boards are appointed by elected officials and the budgets are approved by the City-County Council. These muni corps are: the Capital Improvement Board, the Marion County Health & Hospitals Corporation, the Indianapolis International Airport, the Indianapolis Marion County Public Library, and IndyGo. For the tax cap credit impacts, I will also list the smaller local Libraries and the Speedway transportation system, although I do not have information about their budget totals.

The Capital Improvement Board, as we are often and loudly told does not take property taxes (usually while they are busy picking another of our taxpayer pockets). Their entire budget is not open for approval or rejection by the Council; barred from review is anything to do with Lucas Oil Stadium. The CIB relies upon a laundry list of tax revenues and is so awash in ample cash that it was recently able to give away $33.5 million to the Pacers organization. (Just in case you missed it, that was sarcasm.)

The Indianapolis International Airport is legally able to ask for property tax support, but it does not do so. Instead, it relies on landing fees, funds from the FAA, ticket taxes, and the like for its revenue. This does not mean that they do not impact property taxes in Indianapolis. Given their huge expanse of property and their willingness to extend property tax-free status to the likes of FedEx and others, they cut down the property taxes that could be garnered from private enterprise that operates on airport land. When those taxes aren't paid by these huge and small companies, the rest of us pick up the slack. The biggest loss is to those of us living in Decatur and Wayne Townships, but the impact is definitely County-wide at some level.


In addition to the property tax revenue of each of the muni corps, I am noting the size of each entity's entire budget, since those documents are readily available on the City's website. Links to each are provided with the actual total budget figure. The numbers in the "%" column are calculated by dividing the circuit breaker credit (or, tax cap credit) by the certified property tax levy as determined by the Indiana Department of Local Government Finance (DLGF).

	Total Budget	Property Tax Levy*	Circuit Breaker Credits	%
CIB	$94,127,800	$0	0	n/a
H&H	294,673,536	[108,416,452] 57,128,763	3,964,611	6.9%
Indy Airport	258,972,924	0	0	n/a
IMCPL	49,511,592	[38,426,227] 37,474,023	2,536,486	6.8%
IndyGo	76,413,334	[22,094,075] 20,668,415	1,472,888	7.1%
Beech Grove Public Library		1,116,091	318,490	28.5%
Speedway City Public Library		760,028	7,838	1.0%
Speedway Public Transportation		236,336	2,437	1.0%
* Number in brackets is the amount of property tax levy approved by the City-County Council. Number not in brackets is the levy certified by the Indiana Department of Local Government Finance, which is the final, official amount.

Beech Grove continues to demonstrate higher percentage of its property tax levy having been lopped off in the form of tax cap credits. The muni corps that get property tax revenues have seen an average impact from the tax caps.

2010 Tax Cap Credits - Townships and Excluded Cities

Continuing with the tax cap credits information provided to me by Marion County Treasurer, Mike Rodman, and Administrative Deputy, Cindy Land, today we look at the Township governments as well as the larger Excluded Cities and Towns in Marion County.

The levy figures noted below come from the Indiana Department of Local Government Finance's 2010 Revised Certified Budget Order for Marion County.

	LEVY	Circuit Breaker Credit	%
Township Government
Center	$2,783,421	$264,379	9.5%
Decatur	5,474,087	671,084	12.3%
Franklin	8,982,379	2,200,978	24.5%
Lawrence	11,941,055	663,857	5.6%
Perry	346,557	12,757	3.7%
Pike	16,544,673	330,986	2.0%
Warren	276,097	11,612	4.2%
Washington	700,060	32,685	4.7%
Wayne	19,258,286	2,539,176	13.2%
Excluded Cities & Towns
Lawrence	$8,923,358	$440,173	4.9%
Beech Grove	5,576,089	1,565,259	28.1%
Southport	185,826	3,252	1.8%
Speedway	5,219,915	53,829	1.0%
Clermont	481,471	83,313	17.3%
Cumberland	912,369	169,300	18.6%
Homecroft	75,132	1,183	1.6%
Meridian Hills	165,871	1,500	0.9%

It should be noted that these levies may not be the entire amount of tax money that these units receive. In the case of the Township governments, I do believe that is the case, but I could not find a quick reference with that information posted. So, these figures show only the effect of the property tax caps on the property tax revenue each taxing unit obtains.

The levies for Center, Perry, Warren and Washington Townships are lower because IFD handles their fire protection and is a separate taxing unit. For reference, the Indianapolis Fire Special Service taxing unit saw $2.9 million circuit breaker credit impact on its levy of $53.9 million - amounting to a 5.4% impact.

As with the overall Township information posted yesterday, Franklin Township government stands out, followed by Wayne and Decatur. Beech Grove, which spills into 4 Townships, saw the greatest impact from the tax caps on the revenue it gets from property taxes.

Get Your Waders On - Marion County Tax Cap Credits for 2010

The tax caps are now fully in effect for property taxes in Indiana. Homestead property is capped at 1%, farms and rental property caps come in at 2%, and commercial real estate is capped at 3% of the GROSS Assessed Value.

Tax cap credits were applied to all properties whose tax bill was going to be greater than the percentage allowed by the tax cap for that type of property. If your bill was going to be $1251, and the tax caps only allowed a maximum of $1000, then your 'tax cap credit' is $251. Tax cap credits are called 'circuit breaker credits' as well.

Well, we now have the total amount of circuit breaker credits issued in Marion County for 2010. Thanks to Mike Rodman, Marion County Treasurer, and Cindy Land, Administrative Deputy, for providing me with the information.

I did a little crunching of the numbers to bring them to the level of the circuit breaker credit applied by Township. Below I also list the property tax 'levy', which is what the bills would have totaled without the tax caps. The '%' column shows the circuit breaker credit as a percentage of the 'levy'.

	LEVY	Circuit Breaker Credit	%
Center	$136,294,039	$13,320,476	9.8%
Decatur	35,771,565	4,381,038	12.2%
Franklin	65,315,789	16,053,299	24.6%
Lawrence	115,826,538	6,933,160	6.0%
Perry	82,864,464	4,029,404	4.9%
Pike	106,431,438	2,352,852	2.2%
Warren	86,482,678	3,896,972	4.5%
Washington	158,059,289	10,323,966	6.5%
Wayne	122,517,578	14,005,273	11.4%
Marion County Total	909,563,378	75,296,439	8.3%

Obviously, Franklin Township stands out with a quarter of all property taxes given a tax cap credit. Even looking at it as a total dollar amount, Franklin Township scored the highest with over $16 million in credits, besting far more developed Townships.

Overall, property taxpayers saved an aggregate of $75 million in 2010 on property taxes due to the new property tax caps.

MSD Decatur Township Gives Out 62 Teacher Pink Slips While Bus Drivers Hammered Out of View

Yesterday the Decatur School District handed 62 teachers their pink slips, indicating that their contracts likely will not be renewed this July. Meanwhile, the bus drivers continue to be screwed over by Superintendent Don Stinson out of the view of the School Board and the public at large.

The 62 pinks slips do not guarantee that a particular teacher will be laid off in July, but this year it is exceedingly likely. The School Board authorized the Superintendent to RIF up to 60 teachers (my understanding of their action - but I await the Board minutes to see if that detail is contained) if the Decatur Educators Association did not agree to cut $3 million from teacher expenditures. Apparently the DEA did not agree to any cuts. If somebody has information otherwise, please note it. If nothing else changes, the number of teachers on the RIF list will be reduced by roughly two teachers for each teacher who chooses to retire. While the Administration and the DEA have discussed retirement incentives, no agreement on that matter is evident today.

So, at this moment the teacher situation stacks up this way - The School Board and the Administration could have decided to sell the Southwest Pavilion Office Building (former Concentra Building) and save all 62 teacher jobs. The DEA could have agreed to an across the board 5% reduction in salary and benefits and saved 28 jobs before retirements are counted in. Or both could have been done and saved all 62 teacher jobs for 2 years - awaiting a better economy.

Meanwhile, the bus drivers still see their hours being cut, even as new drivers are being hired. This is being done without a vote of the School Board. The Administration now claims that only teachers and administrators have the right of appeal of any grievance to the School Board. Thus, bus drivers, secretaries, cafeteria workers, custodians, safety officers, and non-teaching support staff, are being denied the right of appeal to the School Board. The Administration is further claiming it has the right to do whatever it wishes in the Transportation Department without oversight by the Board. Both of these are an outrage and the School Board should step in immediately to rectify these abrogations of authority from the duly elected representatives of the community.

The cutbacks in hours would appear to be designed specifically to get the more seasoned drivers to quit, as they cannot support their families on 4 hours per day. And, with two morning and two afternoon hours, they cannot take a second job, either. Our bus drivers are unsung heroes in this District. They know the children on their route by face and name and where they should be picked up and let off. You often hear stories of a caring bus driver who goes that extra mile, no pun intended, to be sure that the children in their custody are kept safe. There is no way that our bus drivers should be treated this way.

This financial mess has been created by Superintedent Don Stinson and his rubber stamping School Board. Of the $9.8 million in cuts that are needed this year, only $1.5 million is due to the budget cuts ordered by Governor Mitch Daniels. The remainder is due to overspending on properties (breaking state laws all the way), huge raises for Administrators even after the Superintendent knew of the likely impact of the tax caps, going into debt to pay pensions when the budget was not big enough to afford the raises, and the total lack of fiscal oversight by the School Board.

Still there is a way out of this fiscal morass without teacher layoffs, without screwing over the bus drivers or any other employee of the District, and without closing Lynwood and raising class sizes. I have laid it out time and time again on this blog. But, if you want to review it again, see ""How to Minimize the Impact of Decatur School District Cuts", "Decatur School Board Should Demand More Administrator Cuts", and "Let's Back Up and Move in a Different Direction".

Meanwhile the School Board meets this Tuesday evening, March 16, beginning at 7:00 in the Board Room of the Central Office. No agenda has been published on the District website as of this moment. That meeting will be preceded by a behind closed doors Executive Session. No word yet as to whether that will be a catered affair.

MSD Decatur Township Should Sell Excess Properties and Cut Administrators

The Mooresville-Decatur Times reported on December 9, 2009, that the Metropolitan School District of Decatur Township must cut $4.2 million from its budget for fiscal year 2010, which begins in July. Superintendent Don Stinson and Assistant Superintendent Jeff Baer blew lots of smoke by blaming the crisis on temporary loans the District floated due to the reassessment ordered by Governor Mitch Daniels a couple of years ago. Did the District have to float those temporary loans? Sure it did. Is that what is breaking the bank? No way.

The crisis is brought about due to the unfettered accumulation of debt orchestrated for the District and the taxpayers by Stinson and Baer and rubber stamped by the hand-picked School Board members, Dale Henson, Don Huffman, Cathy Wiseman, Judy Collins, and former member Larry Taylor (replaced almost two years ago by Doug Greenwald). They have been on a buying spree the last 8 years. In addition to the construction projects (more on the $85 million High School project in a later entry), they pay $750,000 per year on a lease to own agreement with Ameriplex Office Partners, LP, for the purchase of the Concentra Building across Kentucky Avenue from the High School campus, bought property abutting Lynwood Elementary School, bought property abutting the Middle School, and bought a number of parcels spanning from Mooresville Road to Camby Road. Not content to live within the District's income parameters, they have also floated bonds so we could pay into their Pensions over time - with interest.

With the tax caps coming on, several changes are occurring this year. The State has taken over the entire payment for operating expenses; part of this used to be paid with property taxes. But, debt payments and transportation costs will not be paid by the state. Thus, if property tax revenues are not enough to cover debt and transportation, a District must use some of their operating funds to pay the remainder of the debt payment due. Debt must be paid first. With the property tax caps, thankfully, dropping to a cap of 1% of a home's assessed value, the property tax revenue will not be enough to make payment on Decatur School District's outstanding debt. This leads to the need for Stinson and Baer to dig deep into the Operating Funds supplied by the State to make the debt payments this year.

So is the response of Stinson and Baer to sell off property and cut back on Administrators and shut down their plans to move the Central Office over to the posh confines of the Concentra Building? Hell, no ! They blame comparatively small temporary loans and Jeff Baer announces his retirement. I mentioned in the last blog entry that they have brought mall cops in to protect the High School and to save money despite their lack of training for crises. More to be announced at the next School Board meeting. Unfortunately, the District website does not list any Board meeting dates for 2010.

In addition to the $4.2 million that needs to be cut because of the huge debt incurred by Stinson, Baer, and the rubber stamping school board members, Governor Daniels has announced a 3.5% cut in all K-12 school funds. This could amount to roughly $1.5 million more to be cut.

Here is a list of the items that should be looked at first in order to generate money and cut costs.

1) Scrap all plans to move the Administrators from the Central Office to the Concentra Building and move the technical staff to vacant rooms at the Junior High School, Lynwood or Stephan Decatur Elementary. Since they do not own the building, but are leasing to buy to the tune of $750,000 per year, they can sell their lease. They have been paying on this lease to buy for 5 years now. So, even if they have to sweeten the deal by throwing in one year's payment to a buyer, they still should be able to secure $3 million from the equity.

2) Sell the property at 4640 Sante Fe Drive. They tore down the house that used to be on the quarter acre property, causing a drop in assessed value from $83,200 to $13,800. But $13,800 is still real money that can help the cause.

3) Sell the two parcels at 5006 S. High School Road - just north of the Middle School. Combined it is almost 3 acres improved with a house and the zoning remains residential. Surely they can get $150,000 - $200,000 for the property.

4) Sell the 33 acre property at 7900 Camby Road. Farmland has been going for over $11,000 per acre. So, look for about $330,000 from that sale.

5) Sell the 73 acre property at 7820 W. Mooresville Road. At $11,000 per acre a sale would generate over $800,000.

6) Sell the 10 acre property at 7912 W. Mooresville Road - making about $110,000.

7) Sell the 41 acre property at 8106 W. Mooresville Road and get another $450,000.

8) Keep the 18 acre property at 8900 W. Mooresville Road. It was donated to the School District. Unfortunately Stinson picked a location that is mostly wetlands and the cost of development is prohibitive, making the property pretty much worthless.

Selling these properties should generate something like $4.9 million. That will go a long way is trying to make it through the year without laying off teachers.

But, there is more they can do with the Administrators. As mentioned, Jeff Baer is leaving and being replaced by Perry Township's Bob Harris, at $15,000 less salary than Baer. Rumor is that Candice Baer is also leaving. A duplicate Administrative position was created for Candice Baer, wife of Jeff Baer, when she was dismissed as Superintendent of Center Grove Schools a few years ago. That should save at least $175,000 in salary and benefits.

The District should give a pink slip to Susan Adams. Yes, the Susan Adams of Perry Township School Board fame gets an Administrator's salary to be the head custodian of Decatur Schools. She can easily be replaced with a real custodian for a savings of at least $100,000 a year. Likewise, Gary Pellico, a very likable fellow, who serves as the Public Spokesman for the District. You do not need a former Principal at a hefty Administrator's salary to communicate with the public. That would save another $100,000 a year.

Expect Dave Rather, Assistant Superintendent in charge of the building projects, to retire when the High School project is completed. Unfortunately, his salary and benefits have been coming out of the bond funds used for the project and the taxpayers will be paying his salary and benefits off, plus interest, for decades to come. No savings here.

The remaining Administrators should be asked to take at 10% cut in pay. This could save nearly half a million dollars a year. All totalled these Administrative changes could generate about $850,000 a year. Added to the funds generated by selling excess property we could see over $5.7 million this year - exactly matching the $4.2 million shortfall due to overextended debt and the $1.5 million due to the 3.5% budget cut ordered by Governor Daniels.

One more thing - no matter what, the School Board should demand that employees who live in Decatur Township should be the very last to be cut. This would mostly be the bus drivers, custodians, a couple dozen teachers, and one administrator.

Long Live the Tax Caps

Without the property tax caps coming on line this year and next, Decatur residents would be in disastrous straits trying to pay their pay-2009 tax bills. That is because of the irresponsible non-oversight of the MSD Decatur School District by the School Board which has allowed the school property tax rate to more than double in two years; even though the State is taking over all operating costs for the Schools during this time.

For the pay-2008 property taxes, which were recently due, the Decatur Schools had the highest rate of any School District in the County at $2.75 per one hundred dollars of assessed value. Not only that, they were the highest of any of the other 270 school districts (out of 316 total districts) whose numbers are currently being reported on the Indiana Department of Education's website. Hey great ! Last year we might very well have been number one in the State !!! Unfortunately it wasn't in the graduation rate or ISTEP passage rate. Just the property tax rate.

In Marion County, the next highest pay-2008 rate was Franklin School District which charged $2.13 per one hundred dollars of assessed value. The hyperinflated School tax rate made Decatur the highest taxed Township with a total rate of $4.31; a full 20% higher than Franklin and 80% higher that Washington Township.

But wait ! There's more !

For our pay-2009 property taxes, Decatur Schools are charging MORE this year for the schools alone, than the TOTAL property tax rate for all government units combined last year. According to the legal notice published in yesterday's Indianapolis Star, they are charging $5.28 per one hundred dollars of assessed value; 75% higher than last year and two and a half times higher than the year before that. This is twice that of our new competitor, Beech Grove School District who weighed in at a paltry $2.62. This makes Decaturite's total property tax rate, including all governmental units, an astounding $7.04; a full 75% higher than the next highest Township, Wayne, and a staggering 263% higher than Washington Township.

Thanks to the School District's irresponsible debt accumulation, we will be extremely hard pressed to keep the few businesses we have, much less attract any new ones. Let me repeat this new tax rate, thanks to the Schools -- $7.04. Businesses do look at these things before deciding where to locate. So, if you want more for Decatur, vote the School Board out of office in the next election, which will be held in the Spring of 2010.

More later on all of the extraneous property owned by MSD Decatur Township that can be sold to make at least modest reductions in our appalling property tax situation.

Property Tax Rates - What it Means to You

Property Tax Rates are complicated this year and next with the tax cap limits that are working into the final tax bills. For residential homestead use, where you live in the home you pay property taxes on, the cap for pay-2009 is 1.5% of the assessed value.

The bill will show your total assessed value, then subtract deductions and credits for a net assessed value. The net assessed value times your tax rate percentage is the property tax you owe -- only if that number is less than your total assessed value before deductions and credits times 1.5 percent.

For example, if your house has an assessed value of $100,000 and a net assessed value after deductions and credits of $50,000, and you live in Decatur Township with a tax rate of 7.0354, your property taxes would be $3652.70 before the cap and $1,500 after the cap. So, this theoretical house would be charged $1,500 in property taxes. The same house in Lawrence Township which has a tax rate of 2.7210, would be $1360.50 before the cap, and $1,500 after the cap. This theoretical house would be charged $1360.50 in property taxes because it is below the cap.

Answers From DLGF

My call to the Department of Local Government Finance was returned today and a number of answers provided. My thanks to Amanda Stanley for her help.

The tax cap situation is different this year than it will be in 2009, 2010 and going forward -- assuming the legislature doesn't monkey with things.

This year the homestead property tax cap sits at 2% of assessed value. So, if line 2 of Table 1 of your property tax bill shows a 'total gross assessed value of property' as $100,000, your total 'property tax liability' on line 5, should be no greater than $2,000. Table 2 shows the tax cap calculated maximums. If you are like me, the maximum tax cap was less than my actual total tax bill for the year.

According to the DLGF, this is because the school general fund costs are still split between the state and the property taxpayers. In my case, Decatur schools' general fund tax rate is 0.58%, so our cap is really more like 2.58%.

Next year, the state will take over the entire cost of the school general fund. So, we should see a full implementation of the 1.5% homestead tax cap, regardless of the amount of debt our school district carries. And, likewise, in 2010 and after, we should see a 1% homestead tax cap, regardless of debt. The schools will have to use operating funds for debt payments if the tax caps limit their tax revenue too much.

The schools have three ways to get around next year's and after property tax caps -- ways we should all be aware of.

First -- if the school district's property tax revenues, for all items besides the general fund and the pre-school program fund, drop more than 2%, they can apply to the state for a 'levy replacement grant'. The state will have a fixed amount of money in that fund and will distribute it proportionately to districts that fall in this category. The fund likely will not make up the entire shortfall, but it will make up some of it.

Second -- if the school district's property tax revenues, for all items besides the general fund and the pre-school program fund, drop more than 5%, they can apply to the 'distressed unit appeals board' for relief. This would entail public notice to the taxpayers of the district and public hearings before the DUAB. The DUAB would evaluate the testimony and would decide if the school district should be allowed to avoid the property tax caps.

Third -- the school board can call for a referendum, where the public would vote on whether or not the district should be allowed to avoid the property tax caps.

All three approaches deal with current debt, and not new projects. After this year, if the district pays for property or projects over certain amounts, depending upon the exact project, they will be required to hold a public referendum on that project and how much over the tax caps they can go. The voters would decide yes or no. If the district pays for property or projects that cost UNDER those certain amounts where they are not required to hold a public referendum, then they must abide by the property tax caps.

Indy is Lucky to Have Him

Sometimes it seems that the right person is in the right place at the right time to make a difference. So it is, in my humble opinion, with David Reynolds, Controller of the City of Indianapolis.

Among the duties of Controller, is to craft a budget for the City-County; a nightmare for even the most geeky bean counters among us. In addition, Reynolds is a point person trying to grind out numbers and come up with a solution to meet the CIB bailout. Even if you disagree with a bailout, somebody needs to be in there coming up with possibilities that are reliable options for consideration.

What makes the CIB debacle particularly onerous to me, is the enormous challenge the City and County Government is going to have to meet in the 2010 budget -- without the huge bump in new taxes that the CIB wants for itself.

The 'perfect storm' analogy has been used considerably in the last few years - beginning with the taxpayer revolt over substantial increases in property taxes. That revolt led to the property tax caps that take full effect in 2010. I think it is appropriate to use 'perfect storm' to describe the challenge facing Indianapolis in crafting a budget for 2010.

The residential, commercial, and industrial property tax caps will be down to 1, 2, and 3% of assessed value, respectively, in 2010. I have heard that it could mean a reduction of up to $50M in the City-County budget. The full budget was $1.1B in 2009, so it might not seem like much cutting. That would be a false illusion, as the City-County operates on other income besides taxes. Activities that collect fees are the only activities which can be funded by those fees. That leaves things like Public Safety and Parks susceptible to the tax cuts, while Code Compliance, for instance, could like remain little touched.

In 2009, expected tax revenue was $640M, with property tax revenue comprising $303M of that total.

Add the economic downturn to the tax caps impact. Monthly revenues collected by the State have been down 15% year to year recently. Extrapolating that barometer, fairly or not I don't know, would suggest up to another $45M decrease in tax revenues other than property taxes. Layoffs affect income tax revenues, decreased travel affects innkeepers tax revenues, and lower new car sales affect wheel tax revenues.

Add also the decreasing value of residential property that will begin to show up in assessed value in 2010. Assessed values decline 1-2 years after the real price decline has occurred. So, 2010 is when we shall begin to see the housing market fallout in the assessed value. Combined with tax caps, this means even fewer tax revenues for the City and County.

Although the Controller does not have direct authority over the budgets of the Municipal Corporations, he will be involved in finding solutions. In addition to the CIB drama, the Public Library also has a shortfall affecting debt payments to the tune of $25M. We have no word on the effect of the failing economy on IndyGo or Health & Hospitals budgets. Certainly for all these Municipal Corporations, the lower tax revenues mentioned above should be expected, maybe to the tune of 15%.

Controller is an unenviable position to hold in our City right now. We are lucky to have David Reynolds in that post because he is quite capable, smart, and honest.

All this does not remove responsibility from the public to pay attention to the budget process this coming August. The cuts will be real and it is up to the public to weigh in on how the cuts are allocated throughout City-County government and its attendant services.