Saturday, April 6, 2013

Budget Prestidigitation - False Long Term Solutions To Be Served Up

One consistent hallmark of all of City budgets since Ballard was elected Mayor, has been the early public relations effort flowing through the press, trying to shape what the public thinks about the budget.  For instance, in the first couple, while revenues were growing, the early press claimed near-crippling shortfalls.  The early press dictated the later press.  As the recession's impact actually began, and election rhetoric was heating up, the early press claimed near dodges of cuts in services - while the administration pulled tens of millions of dollars from the downtown TIF to make ends meet, hoping not to be noticed.

We now enter the post-recession era, as property values are rebounding.  Now what will they blame for any budget difficulties?  Income tax revenues are expected to grow.  Increased property values should lead to fewer people hitting the tax caps.  Budgets, by all revenue accounts, should be getting easier to manage than the past few years.

Yet, where are we?  I point to two news items by IndyStar's excellent City Beat reporter, Jon Murray.  Yesterday Murray reported on the property tax bills that are about to be mailed in "70% of Marion County homeowners to see higher property tax bills".  He writes:
In Marion County, the treasurer’s office estimates that 64 percent of the 366,264 bills it will send out for properties of all types will reflect an increase. The total amount being billed this year, slightly more than $1 billion, is up 4 percent.
There are three sources for the increased bills and the increased total tax collection.  First is the increased assessed value for Marion County property.  Property values outside of TIF districts increased by 1%, according to the budget order of the Department of Local Government Finance.  Second is the increased property tax revenue being requested by the various governmental units.  The third is all property value kept from paying for local government services because they are either consumed by TIF districts or deliberately kept as government-owned, tax-free, property.

Today, Murray's story is about the behind the scenes discussions on the 2014 budget, which are said to be veering necessarily to layoffs of police and fire personnel, among other cuts; "Indianapolis, Marion County leaders are finding $30M in budget cuts a tough task".
Now administration and council leaders are staring at options that range from eliminating vacant positions, renegotiating contracts and making simple accounting transfers to much more difficult considerations, such as cutting back on a parks after-school program or transferring some pools on school grounds back to Indianapolis Public Schools’ control.

Then there are the possibilities of police furloughs and layoffs of firefighters and deputy prosecutors, as well as cutbacks on public defender services.
They want you to blame property tax caps for any coming public safety service cuts.
A new wrench in the debate is recent notification from the state that tax caps were expected to trim $10 million more than expected from the municipal budgets this year, adding more pressure to cut back. 
So, how did property tax cap penalties grow so much?  If the assessed value is rising on 64% of all property owners, fewer people should be hitting the tax caps, and the tax cap penalty hitting local government should be dropping.

The silent player in all of this are the TIF districts - which were expanded significantly this year despite the fact that they accounted for over 40% of the tax cap penalties for local government last year.  The more property value consumed by TIF districts, the higher the hit on local government's coffers.  Its simple.

Any real long term solution will have to put more property value on the non-TIF property tax rolls.

We MUST retire older TIF districts as their oldest bonds become due. 

We MUST call on the Airport to return to the tax rolls, the hundreds of acres it does not need for aviation purposes.

We CANNOT grow fast enough through so-called economic development cash giveaways to compensate for the speed with which we have grown our TIF districts.

Yes, this year they'll blame tax caps, when they have shown no desire to limit the real cause of the post-recession budget difficulties.


Gary R. Welsh said...

How can anyone blame property tax caps when the Treasurer's office says that only 17% of the property taxpayers are at the cap?

Had Enough Indy? said...

Excellent point.

Anonymous said...

Doesn't that argument require a bit more accounting? For instance, if 70% of all properties in Marion County increased in value by 1%, then 70% of all properties would see an increase in their tax bills.

Likewise, since what's captured in the TIF is the stuff that's added post TIF, wouldn't it be worthwhile to explore how property that's within a TIF, but not captured because it's what was there pre-TIF, is growing (or not growing) in AV?

Had Enough Indy? said...

70% of residential properties (64% of all properties) increased in av - so yes, those bills would go up, regardless of whether they hit the tax caps.

The base in TIFs gets converted into increment through an annual filing with DLGF - so pre-TIF gets to be random as far as if any pre-TIF value remains.

Yes, there are many ingredients. Still TIFs do pull property off the tax rolls that are paying for services - rather those tax revenues are spent on business ventures and amenities that businesses want but would rather not pay for themselves.

Anonymous said...

So the new TIF that includes Broad Ripple could easily take all the existing valuation of all of Broad Ripple and turn it into increment, giving that TIF millions of dollars next year?

Had Enough Indy? said...

Yes, but it is more likely to take a couple of years.