Can We Just Stop With The Lying?

So the income taxes are going up.

Front and center in the IndyStar review of last night's vote of the Council, is this quote from Councillor Aaron Freeman:

"We have fewer officers than we should because we have been taking in less property taxes in this bad economy the last several years."

He makes it sound like the Council and the Mayor have had less money to work with and that is why they didn't support funding recruit classes for IMPD these past few years, as the Council Democrats had continued to try to do.

Freeman either knows he is lying to the public, or he is just passing along the meme offered by Ryan Vaughn.

Yes the City-County takes in less property tax revenues than they did before the tax caps came into effect.  They also have fewer bills to pay.  This actually left the City-County with about $50 Million MORE to spend than they had before the tax caps.  Add to that the increased revenue from Peterson's Public Safety Tax, and well - they had plenty of money to do any hiring they wanted.

But, they did not.

Even without the tax increase, the 2015 budget does fund a recruit class of 50.  With the tax increase, they are looking at 40 additional.

So, its not true that "we have fewer officers than we should because we have been taking in less property taxes in this bad economy the last several years".  We've had the money, just not the interest.

Suppose for a second that Freeman's statement were true - why would we need to raise income taxes when both property tax revenues and income tax revenues are climbing now that the economy has improved?

And if the Ballard Administration truly sees a need to increase the number of officers, why is Jason Dudich saying that only $4 M will go to IMPD's budget in 2015?  The tax increase is expected to bring in $29 M.  $2 M goes to the excluded cities and towns, by State mandated division of Public Safety Tax revenue.  Likewise, $10 M will go to County functions - but no discussion as to how that money will be spent has been done in public.  That leaves $13 M that Dudich wants to put into IMPD fund balance.  This would be overruled in a heartbeat if Vaughn wanted the money to be spent by IMPD.

That's right folks - you get to pay more in taxes so that the biggest chunk can fatten the year end balance.  And a whopping fourteen cents of every additional dollar will go to hiring more police officers.  Fourteen cents.

One cannot ignore the fact that this tax hike comes just before the proposed Criminal Justice Center gets crammed through.  Could be a coincidence.

So, we'll see if this Administration actually moves toward keeping interested in hiring more officers as the years go by, or if they'd rather spend this new money on something else.

Meanwhile, can we just stop all the lying?

They Call it "COUNTY" Option Income Tax for a Reason

In a previous blog entry I showed graphs comparing the impact of eliminating the Local Homestead Credit, expanding the old IPD Tax District, and doing both, on various units of government.  In that I showed only the aggregated impact on City and County government.  That is the government run out of City Hall.

Now, because of obfuscation and deliberate confusion being tossed around by the Mayor's Office to the media, I'd like to show you what effect these tax changes would have on the pieces of City and County government.

But, first...

The Local Homestead Credit is a reduction in property tax bills that is paid for by using County Option Income Tax (COIT) revenue.  They call it County for a reason - the income taxes collected go to the COUNTY.  Not the City of Indianapolis.  Not to the IMPD fund.  Not to the IFD fund.  But to the County of Marion. If the Local Homestead Credit is eliminated, there would be more COIT money to spend on other things.  But, again, it is COUNTY Option Income Tax.

There are 6 different property tax districts that provide money to City and County government.  Each has a different footprint in Indianapolis/Marion County.  I will give you the impact data for each of these at the bottom.  But, for clarity and a bit of simplicity, I want to concentrate on the tax impact on the Police district, the Fire district, the consolidated City, and the consolidated County.

So, without further ado...

The overview of how eliminating the Local Homestead Credit, expanding the old IPD Tax District, and doing both will affect the coffers of the Police, Fire, City and County.

The scale is Millions of Dollars

As you can plainly see, most of the additional revenue would go to the County government coffers.  That's the Sheriff, Clerk, Prosecutor, and more.  By comparison, IMPD sees only a blip in increased revenue, Fire less so and nearly imperceptible changes for the City. [edited - my mistake here, the consolidate County is actually the City's general money - but none of that fund is used for police or fire.]

Looking more closely at each individual group...

POLICE

The scale is Thousands of Dollars

The Police fund would see its best gain if only the old IPD Tax District were expanded and slightly less if both changes are made.  It sees a loss of just over $200,000 in revenue if only the Homestead Credit is eliminated. 

FIRE

The scale is Thousands of Dollars

The Fire fund would see less than half the gain that Police see if only the old IPD Tax District is expanded.  It would experience a loss of almost $800,000 if only the Homestead Credit were eliminated.  And it would see a modest loss if both changes are made.

CITY

The scale is Thousands of Dollars

City funds would grow by a bit if the old IPD Tax District were expanded.  It would see roughly a $2000,000 loss if the Homestead Credit were eliminated, and about $150,000 loss if both are enacted.

COUNTY

The scale is Millions of Dollars


The County gets buckets-o-cash if the Homestead Credit is eliminated and next to no change if the old IPD Tax District is expanded.  Please note that while the scale of the preceding three graphs has been Thousands of Dollars, this scale had to be Millions of Dollars.

Here are the exact numbers for all 6 tax districts.  You'll notice an additional 'County' district that brings in even more money to the County coffers.  Please do not ask me why there are two County districts.  Loss of revenue is highlighted in red.  Gain in revenue is black.

Name	HSC Elim. Only	IMPD Exp Only	Both
Marion County	$1,346,500	423,000	1,720,400
Indianapolis Sanitation (Solid)	(254,400)	94,000	(171,600)
Indianapolis Police Special Service	(234,100)	1,671,000	1,332,800
Indianapolis Fire Special Service	(749,400)	645,000	(130,600)
Indianapolis Consolidated City	(225,100)	90,000	(164,100)
Indianapolis Consolidated County	8,442,000	173,000	8,576,300

So, what have we learned here today?  While the Mayor's office continues to connect these tax changes with some improvement in IMPD's budget, it is a fabrication intended on selling the tax changes.  Expanding the old IPD Tax District does have a small, but real, affect on IMPD's revenues.  But eliminating the Homestead Credit has a negative affect on IMPD. 

It is a shame that we cannot get the real story from the Mayor or his Chief of Staff and that we citizens have to resort to examining the minutia of the numbers to learn the truth.

Dazzle Them With Numbers

Tonight the Admin & Finance committee of the City-County Council will consider eliminating the local homestead credit (again - Prop 274) and expanding the old Indianapolis Police District taxing district (Prop 275) from basically the old city limits to the entire county minus the excluded cities.

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. 

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?

IMS Tax Givaway Would Affect Local Tax Revenues To City and (Gasp!) the CIB

A lot of misinformation is swirling, regarding local tax revenue implications of SB91, the $100 million giveaway to the Indianapolis Motor Speedway.

From the bill itself (page 6 of the pdf, lines 24-34):

Sec. 5. As used in this chapter, "covered taxes" means the part of the following taxes attributable to the operation of facilities located in a motorsports investment district designated under this chapter:

(1) The state gross retail tax imposed under IC 6-2.5-2-1 or use tax imposed under IC 6-2.5-3-2.

(2) An adjusted gross income tax imposed under IC 6-3-2-1 on an individual.

(3) A county option income tax imposed under IC 6-3.5.

 

(4) An admissions tax (if any) imposed under IC 6-9.

 

Unfortunately, no estimate of the fiscal impact has been done by the Legislative Services Agency.  But, out of respect to the taxpayers of Indianapolis, let's at least stop with the erroneous information that this is only a State Tax giveaway.

Mayors' Budget Veto Just May Be About Tax Increases - Its Certainly Not About A Balanced Budget

Mayor Vaughn usually pulls the strong arm stuff out of view of the public.  Threats, horse swapping, calling on Republican unity even when distasteful, cajoling with the greedy and ambitious.

Now his tactics are in full view with his veto of the balanced Council budget and his denunciation of the $15 M PILOT from the CIB, that leaves the door open for (gasp!) recruit classes for IMPD and IFD.  How awful of the Democrats !

Its not about the fiction floated by the Vaughn administration that the Council's budget is not balanced - because it certainly is.  For those readers who are number averse, just skip the rest of this paragraph and join me in a few sentences.  The Mayor's introduced budget spends $1.13 B while the Council's passed budget spends $1.12 B.  The Mayor's budget takes in revenues (excluding property taxes) of $676 M while the Council's budget takes in revenues (excluding property taxes) of $673 M.  They both raise $351 M in property taxes.  The Mayor spends down $106 M from fund balances while the Council spends down $99 M from fund balances.  None of the $15 M PILOT from the CIB, passed by the Council and opposed by the Mayor, is part of these numbers.

One quick aside - While the Mayors pretend to be disgusted by the one time infusion of the $15 M PILOT to cover operating expenses, they eagerly dipped into the downtown TIF for $30 M for the Pacers and $40 M to make ends meet in this year's budget AND have another $10 M to be used for next year's budget.  So, don't be buying their sudden alarm at the PILOT - its all an act.

Mayor Vaughn and his ally, Mayor Ballard, really really really wanted the Council to eliminate the Homestead Credit, which would save the City-County $8.7 M but foist $3.5 M in lost revenue on the various school districts in the County.

The Mayors really really really want more TIFs so that they have more slush funds to work with, even though they mean higher taxes for all of us and greater revenue losses for IPS, in particular.

There are two new taxes that will be on the table in the spring - increases of the car rental and admissions taxes are the last bits of the old CIB bailout from a few years ago.   The Mayors will want those to pass a Democrat controlled Council.

There will be an announcement soon of some sweetheart deal with the Pacers - the only question remains as to how much more of our tax money will be going to them instead of to fund police and fire protection, schools, libraries, IndyGo and the rest of services that impact most of us on a daily basis.

There is the push for a specific mass transit plan that spends more getting Hamilton County transit than it does on IndyGo.  The Mayors will want all on board to lobby for a tax increase public question on the 2014 ballot.

And, I grow more and more wary of an income tax hike being lobbied.  Councillor Ben Hunter has become the spokesperson for Vaughn in open Council meetings of late.  He pushed against the elimination of the Homestead Credit in committee (and voted against it there).  However, once the budget hit the floor of the full Council, he was all over the big bad Democrats for realizing, but not responding to, the impact keeping the Credit would have on the Council's lobbying 'on the other end of Washington Street'.  He also brought in the disingenuous and false arguement that the Credit amounted to poverty level wage earners subsidizing the mansions of the rich.

A push for income taxes split by workplace as well as residence would be welcome.  But the pushback from Senator Luke Kenley's home County, plus other donut counties, would be massive.  What I fear is a push for higher income taxes to be paid by residents of Marion County.

To make that work with the public, you would have to see exactly what we are  now seeing - an underfunded public safety budget that threatens to degrade the already low numbers of officers and firefighters.  So, the Mayors just may have a stake in not solving the recruit class problem, and not paying the raises that they agreed to in the IMPD and IFD contracts.  They just may have a stake in having the Feds claw back the COPS grant money spent here, because our officer number dropped below agreed to figures.

Its not that these are easy times; they are not.  But the Great Recession will pass and the income tax coffers will rise.  There are some, though, who would not want to waste a perfectly good crisis by simply making it through to the other side with the same resources, when you can use it as an excuse to fatten those resources.

The short leash created by the Mayors' vetoes of the Council budget can be used each time the Mayors want one of their taxes passed, or one of their issues lobbied, or one of their TIFs fully bonded and uncomplicated by TIF reforms.  That leash can be yanked when the Pacers deal becomes public and money flows from resources that should go to help all of us to instead be diverted to some of the wealthiest individuals in our area.  And, the leash will keep the Democrats from spending any money on that recruit class nonsense.  The PILOT money can just sit there an rot, instead.

This melodrama, created by the Mayors vetoes, never was about a supposedly unbalanced budget.  It certainly is about control of the Council.  How many times this leash will be yanked is up in the air.   But, beware - its going to cost all of us.

TIF Fact #1 --- We've Been Bailing TIFs Out For Years

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

Marion County TIFs have been getting bailed out for years.  Over the last 4 years the City-County has pumped $40.5 million dollars into TIFs beyond what they took in from property taxes on their own.

• $1.2 million from Local Option Income Tax

• $6.1 million from garage operations receipts of city-owned garages

• $16.6 million transfers from consolidated downtown TIF and airport TIF to other TIFs

• $16.6 million in additional property tax levy to the County as a whole

• __________

• $40.5 million 

Did you ask for the financial analysis that shows how the expansion of the downtown TIF will not require future bailouts?

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: City-County budget ordinances Prop 09-321, Prop 10-234, Prop 11-241, Prop 12-285

First Do No Harm - Impact of TIFs - Marion County As a Whole

Many people in positions of power in the County prefer to sell the vision that TIFs create 'found money' that would not have existed but for the TIF, and that the property tax revenues that went to the schools and libraries and IndyGo before the TIF was set up will continue to flow to those units of government after the TIF is set up.

Either they don't know the difference between those fairy tales and reality, or they don't care.

TIF districts in Marion County

• do not fulfill the promise of catalysing economic development that would otherwise not happen (see "Most Marion County TIF Districts Underperform the County As a Whole",
• do not fulfill the promise of securing the property taxes that flowed before the TIF was created (the "base") (see "Marion County's TIF Districts See Base Erode By Nearly Half a Billion Dollars in One Year",
• need bailouts in the tens of millions of dollars every year (see "Big Time Bailouts of Indy's TIFs")
• cost property owners and renters more money, and
• cost the units of government in money they qualify to receive but cannot due to the property tax caps ("circuit breaker penalty").

From the TIF Study Commission Report, Appendix 2, part one (page 6) you can find the impact of the TIF districts on taxpayers and governmental units alike. In total, this table tells us that for 2012, the TIF districts in Marion County

• cost property tax payers an additional $56 million in increased taxes, and,
• cost schools, libraries, etc, $43 million in additional circuit breaker penalties to the governmental units.

Property taxes are passed through to renters, so even those who do not own property are on the hook for a higher cost of living because of TIFs. The loss of revenue to the schools, the library, IndyGo and more, results in loss of services - and $43 million can pay for a lot of services.

The percentage of taxable property tied up in TIF districts and which, therefore, do not contribute tax revenues to the schools, libraries, etc, varies from Township to Township.  From the TIF Study Commission Report, Appendix 2, part two (page 4) you can find the following percentages of taxable property tied up in TIF districts in 2012:

Marion County as a whole --- 8.9 %
Center Township --- 33.3 %
Decatur Township --- 14.0 %
Wayne Township --- 9.5 %
Lawrence Township --- 3.6 %
Warren Township --- 1.1 %
Perry Township --- 0.6 %
Pike Township --- 0.6 %
Washington Township --- 0.3 %
Franklin Township --- 0.1 %

The percentage of taxable property tied up in TIF districts in 2013 has grown to 11.1%, in large measure to $490 million of assessed value being removed from the base and given to the increment.  [The "base" is the part of the TIF district that existed before the TIF district was created.  The "increment" is the part of the TIF district that grew after the district was created plus any value taken from the base and turned into increment over the years.]

For next year, two more TIF districts will see their base drop to zero.  Out of 40 TIF districts, we will have 16 where ZERO tax revenues flow to the schools, libraries, IndyGo, etc.  For 2013 we see 3 TIF districts with an increased base, while 23 have a decreased base.

In the past 4 years we have seen $40.5 million bailouts of the Marion County TIFs districts.  These bailouts came from income taxes, garage receipts from city owned garages, transfers between TIFs, and, startling enough, from increased property taxes outside the TIFs to secure the TIFs.

One can only look at all of this information and conclude - Marion County TIFs are in trouble.  They continue to need more property value extracted from the base and continue to need other tax money to keep them propped up.  The more we keep property off the tax rolls or the more property value we add to the TIF increment, the more it costs taxpayer, residents and businesses to make up the difference.  And, the more property we keep off the tax rolls or the more property value we add to the TIF increment, the more it costs the schools, libraries, and IndyGo in noncollectable revenue due to property tax caps.

The TIF districts that we already have in Marion County are costing us a pretty penny each and every year.  They have not spurred development that would not have otherwise occur.   We should at least ask what impact any new TIF districts will have.  Yet, appallingly enough, not one question was asked about the proposed TIFs at the August 27 meeting of the Metropolitan & Economic Development committee meeting.  Such is the fairy tale and those who do not want to know about the reality of Marion County's TIFs.

Update - Budget Overview

The complete budget still has not been published online, and hopefully will be by week's end.  Therefore I am unable to tell you what the real overview is, not even the budget total.

On Tuesday night, City Controller Jeff Spalding gave the Admin & Finance committee his overview presentation.  Here are some highlights that affect how the 2013 budget is constructed.

There are three agencies that primarily charge other departments and agencies for their services, rather than get revenue from the various city or county funds. 

Over the last few years, the ISA (information services agency) has underwritten some of its actual costs by using excess money from one of its own funds.  That fund is nearly depleted, so this year the true costs are being charged to the various departments for their technology usage.  ISA will charge $30 million for its services in 2013, up $4 million from this year.

OCC (office of corporation counsel) will charge  $3.7 million, up $146,000 from this year.

The MAC (mayor's action center) will charge $1.2 million, up $0.4 million from this year.

[keeping track --- so far about $4.5 million additional costs demonstrated]

In addition, certain other costs are rising - retirement benefits, health insurance, rent for instance.  No price tag was mentioned for these rising costs.

They also want to include a fund from which merit raises to non-public safety employees would be taken.  If I understood it correctly, $3 million would be set aside for these raises.

[keeping track -- so far about $7.5 million additional costs demonstrated with others mentioned, but no price tag noted]

The budget for each department and agency is said to begin with the 2012 budget and add additional revenue to cover all of these added costs.  (This is apparently not the case for at least one of the budgets presented in the first two days of hearings.)

Income tax revenue is expected to be $233 million, down $10 million from last year which saw a $47 million boost due to correction of a State distribution error for 2011 and 2012.  $30 m of that returned money was put into a rainy day fund and some will be tapped for 2013. 

The City-County expects to actually collect, after the tax caps are subtracted, $307 million from property taxes in 2013, down $10 million from this year.  The tax caps for the city-county alone, should eat up $44 million in 2013, up $7 million from this year.  Remember that the City's own TIFs cause about a third of the tax cap problem for all taxing units throughout the County.  Other 'incentive' programs like abatements also increase the amount of money governmental units could collect but don't because of the tax caps.  And, don't forget the thousands of acres the airport does not need for aviation purposes, but is keeping off the tax rolls anyway.  Returning these acres to private ownership and therefore to the property tax rolls could lower all of our property taxes and simultaneously increase the amount of money governmental units actually recieve.

[keeping track --- so far some of the revenue sources of the City-County are down a total of $20 million]

The Controller said that the difference between the 2012 plus additional costs and the expected 2013 revenues, is $65 million.  He plans to fill that difference by drawing $20 m from fund balances, using $17 m from the rainy day fund, and by taking another $10 m from one of the TIF districts (they haven't decided which ones yet).  They want to end the homestead tax credit in order to net an additional $8 m for the City in COIT money. (The homestead credit is funded with COIT money to the tune of $13 million.  When that credit is removed from tax bills, the tax cap credit will increase to cover the difference for those homeowners who already hit the caps.  That amounts to $5 million increase in tax caps.) They want to institute a charge for use of take home cars to gain $1 m.  They want to save $5 m by suspending the 3% raise for fire and police union employees, $3 m for the election board because it is not an election year, and save $1 m in IMPD and IFD overtime charges.

We will revisit the budget overview once the entire budget has been released.

Jail Overcrowding And The 2005 COIT Increase

Much hay is trying to be made of an increase in the County Option Income Tax back in 2005.  So I thought I'd revisit just what was going on at that time and who voted what way on the increase.

Jail is the place where folks who have been arrested await trial.  Prison is the place where folks who have been found guilty go to serve their time.  Not all those folks who are in jail are innocent of the crime for which they are charged.  Not all those folks who are in jail are guilty of the crime for which they are charged.

For many years, Indianapolis/Marion County had a jail overcrowding problem.  It really was a human rights issue.  Finally, the Courts handed down an order that limited the number of arrestees who could be kept in the jail.  What followed was the release of arrestees to keep the count below the court order.  The situation is best summarized by Councillor Steve Talley at one of the hearings to raise the County Option Income Tax (I'll tie that tax increase in below - this is just the best summary I could find of the jail overcrowding problem)

Councillor Talley said our criminal justice officials are over stressed and under funded.  Our jails have been over crowded for the past 30 years, and worst of all, murderers and other dangerous criminals are being put back on the street.... Councillor Talley said since the early release of criminals in 2001, more than 9,000 offenders have been put back onto the street and five have been linked to homicides following their releases. He said that in 2004 alone, more than 1,500 people were released from jail early. Of those, 238 have committed additional crimes while awaiting trial. Councillor Talley indicated that 31% of criminals released early fail to appear for scheduled court dates.

I actually believe that the Council's finest hour came when they formed the Marion County Criminal Justice Planning Council to examine all the reasons why the criminal justice system was so slow that arrestees backed up in the jail - waiting for trial.  This group examined all of the ingredients.  Their approach was non-partisan and when they went to the public to share their findings, they did so by having Democrat Judge Mark Stoner and Republican County Clerk Doris Ann Sadler as the spokesmen.  The Planning Council was established in 2003.  The members of that group were representatives of the City-County Council Sheriff's Department, IPD, the Prosecutor's office, the Public Defender, Community Corrections, the Crime Lab, the County Clerk, the Circuit Court, and the Superior Courts, among others.

Enter Prop 44, 2005, to increase the County Option Income Tax from 0.7% to 1.0% over three years.  The tax had been held down in Marion County while all surrounding counties had gradual increases over the years and were already at 1.0%.  In fact, almost all counties in Indiana had reached that level by this time.

Prop 44 was sponsored by Democrat Councillors Nytes, Talley, Sanders, Gray, Moriarty Adams, Brown, Bowes, D. Mahern, and Boyd, and Republican Keller.  It passed out of committee with a do-pass recommendation by a vote of 4-3 that split along party lines.  Voting yes were Democrats Sanders, Brown, Moriarty Adams, and Nytes.  Voting no were Republicans B. Langsford, McWhirter, and Plowman.

Come the night of the full Council meeting, the comments of Republican Councillor Borst are the most illustrative of the evening's discussion.  From the minutes of that meeting:

Councillor Borst said that he started the day believing he would vote one way on this proposal and ended the day thinking another. He said that he sat down and calculated over $115.5 million worth of annual needs for the City and County that cannot be met with the current budget and revenues. He said that he does not think this is the right answer to solving the problem and believes it is just another band-aid which does not come close to fixing the budget woes.  However, he recently saw the judiciary and criminal justice system take steps in consolidating administrations to find cost savings and free up funds, and he applauds them for taking these steps and thereby indicating their serious commitment to funding initiatives. He said that he is tired of seeing prisoners released from jail early and wants to see the crime lab get the funds they so desperately need. Councillor Borst said that he was encouraged to see what happened today, with Republicans and Democrats getting together and working to solve problems and communicating openly. He said that the result of these discussions was an agreement to insure that revenues generated by this increase will be used to address funding needs of the criminal justice system and public safety operations, such as jail overcrowding, criminal court expenditures, forensic services, and debt owed to the Indiana Department of Corrections. He said that, if available, new revenues generated by the proposal could be applied to inventory property tax relief for citizens, and if another revenue source is identified, the revenue could be applied to real property tax relief or the COIT could be rolled back. He added that several recommendations are being identified to present to the Marion County Criminal Justice Planning Council for streamlining and creating efficiencies within public safety and the criminal justice system. He said that he is against raising taxes, but will now support this proposal, knowing that the money will go where it is needed most.

Prop 44 passed by a vote of 21 to 7 with one absence (Speedy).  Voting yes were Democrats Abduallah, Bowes, Boyd, Brown, Conley, Franklin, Gibson, Gray, D. Mahern, Mansfield, Moriarty Adams, Nytes, Oliver, Sanders, and Talley, and Republicans Borst, Bradford, Keller, B. Langsford, McWhirter, and Randolph.  Voting no were Republicans Cain, Cockrum, Day, Pfisterer, Plowman, Salisbury, and Schneider.

The next couple of years saw the rollout of the plan and its implementation, funded by the increased COIT funds.


An Indianapolis Business Journal editorial on August 2, 2006

There has been some progress. The Marion County Criminal Justice Planning Council's vote Aug. 1 to recommend renting 200 jail beds for six months was a smart decision that the City-County Council would be wise to ratify at its meeting Aug. 7. But it's purely a short-term fix.

There is broad agreement that the long-term solution is making the wheels of justice turn faster. Cases need to proceed more quickly so that inmates spend less time in the county lockup.

To grease those wheels, we need more judges, attorneys and clerks. And we need to pay them better, so that they stick around a few years.

And from IBJ Reporter, Scott Olson, on January 1, 2007:

 At the administrative level, Peterson called for an extra $54 million in public safety and criminal justice spending in 2007, $19 million of which funded fire protection. Most of the money came from the County Option Income Tax and borrowing from the city's Sewer Fund.


From that, $2.2 million already has been spent to create a night court to process cases faster and relieve strain on the jail. Overcrowding is a major concern, because a court-ordered cap forces Sheriff Frank Anderson to release potentially dangerous inmates early if the jail population exceeds capacity. A concept he has floated involves outsourcing jail management to a private firm that could manage inmates more efficiently, supporters say.

Moreover, Prosecutor Carl Brizzi has added six deputy prosecutors to the homicide unit, bringing the total to 12. COIT money funded the new positions, as well as additional jail beds.

The Planning Council still has a remnant in the Thursday Afternoon Group.  Representatives of the Council and Public Safety and Criminal Justice agencies all meet to discuss and coordinate ways to be more efficient and effective.  I'll repeat what I said above and many times in public meetings.  I believe that the work of the Marion County Criminal Justice Planning Council was the finest example of good government; with all parties working to determine the causes of a problem and the ways to remedy them.  The positive outcomes of this group's work continue with our City today.

Is The Sale Of City Assets The Real Reason For This Year's Budget Chrunch?

This is the fifth year that I have spearheaded the budget review effort of the Marion County Alliance of Neighborhood Associations.  Each year is different to some extent.  This year there are some real anomalies and, frankly, I'm still trying to wrap my head around them.  So, none of that in this post.

Mayor Ballard and his administration are focusing their comments, and hoping thereby to focus the public's attention, on decreased tax revenues and waving their hands about a $64 million shortfall in order to justify transferring $38.5 million from the consolidated downtown TIF to make ends meet.  I cannot actually locate the $4.2 million transfer from the CIB in the 2012 budget, so I am leaving that off for now.

The rhetoric is that property taxes are stable, but income taxes are off $85 million from their peak in 2010.  A closer look at the numbers provided in the 2012 budget book show a drop of $11 million in combined local tax revenues, an increase of $7 million in property tax revenues, and a drop of $15 million in income tax revenues between the 2011 and 2012 budget years.  Add it all up and you have a drop of $19 million.  Real money to be sure, but the City claims to have cut the budget by $20 million simply by requesting non-safety departments that rely on these very tax revenues to each cut their budgets by 6%.

Ordinarily I would also be commenting upon all of the other sources of revenue in this paragraph.  But, unfortunately this year's budget book does not supply a summary table of revenues.  I will have to slog through the details of the budget, which has been provided online, create my own spreadsheet and from that, my own summary table.  I have not had the time.  Representatives of the Office of Finance and Management insist that a summary table will be provided before the budget ordinance is passed.  Great.

Moving on.

The budget for the Department of Public Works is more than interesting this year.  That Department operated the profitable sewer utility that was the sweetheart part of the sale of the water and sewer utilities to Citizens Energy - a deal that closed this past week.  DPW's budget is also the one that serves as the collector of parking meter fees.  You will recall that the meters were sold via a 50 year lease with ACS and some local parking companies with enough political clout to get themselves included in this great giveaway of public assets.

Comparing the DPW budgets for 2011 and 2012 it is easy to see that expenses (p. 41 of the link) have dropped by $78.4 million (largely due to the off-loading of the sewer and water utilities), but a drop in revenues (p. 37 of the link) of $153.0 million.  Looking closer, there is a drop in contribution from the Indianapolis Foundation/Central Indiana Foundation from $8 million to $200 thousand. 

Under parking meters you can see a drop from $2.3 m in 2011 to $1.3 m in 2012.  This, of course, is part and parcel of the fee-sharing demanded by the parking meter contract.  None the less, it means less money for the City each year.  In 2012 it means $1 m less.  Still real money.

The rest appears to be mostly sewer utility related - so, roughly a drop of $144 m, give or take a couple of million.  There is a PILOT (payment in lieu of taxes) that was increased this year and continues to flow from the sewer utility.  That seems to be contained in its own fund which shows revenue for 2012 of $7.5 m.  There is also another roughly $3.5 m scattered among a number of funds from PILOT payments from Waterworks.  Good money, but not enough to cover the cash cow that the sewer utility was for the City and its taxpayers. 

All of this distills down to about a $50 million revenue shortfall due to the sale of the sewer and water utilities and a $1 million revenue shortfall due to the 50 year lease of the parking meters.

It is apparent that the sale of our assets, especially our profitable assets, is having a much larger impact on the 2012 budget than is any drop in tax revenues.  And while tax revenues will recover, loss of our assets will be a permanent loss to all future City/County budgets. 

It therefore becomes imperative that the cuts be considered permanent and structural changes be made for sustainable budgets going forward.  Sure, Mayor Ballard can transfer (aka 'rob') $38.5 million from the consolidated downtown TIF to make ends meet in 2012.  But, lets not pretend that that is a permanent solution to a permanent change in City finances.

More Goodies For Companies - More New Bad Laws

Last week I blogged about a new state law that was illuminated by the proposed abatement for Navistar / Pure Power - whereby it is now legal for cities and counties in Indiana to hand out 10 year, 100% property tax abatements at will.  (See "Navistar / Pure Power Abatement Illuminates New Law - New Bad Law")

Today I want to add two other features of HB 1007 that have made it into law - one sort of a good idea, and the other not.

The better idea is now contained in IC 6-1.1-12.1-16.  A property qualifies for a 3 year, 100% abatement, under one of two conditions.  First, if the parcel is located in a designated downtown district, has a vacant building on it that exceeds 50,000 square feet, and the owner is looking to invest at least $10 million into the upgrades.  Second, if a county has experienced for 2 years, an unemployment rate that exceeds state average by 2% for both years, they may apply this abatement anywhere in their county.

Now this law isn't all that bad.  Its intention is clear and measurable, and the abatement is of short duration.  Not withstanding that, it is totally superfluous, given the next section of the Code that allows 10 year, 100% abatements for any property in any county in Indiana.

Now, for more fun, HB 1007 also spawn a new COIT-sharing law.  IC 6-3.5-9  requires approval of any deal by the fiscal body of the city or county.  Here in Marion County, that would be our City-County Council.  A City or County can enter into an agreement to hand over County Option Income Tax and Local Option Income Tax, created by the hiring of new employees who reside in that city or county.  The COIT and LOIT money may be provided to the employer for up to 10 years.  It can be any fraction of the COIT/LOIT increase up to 100%, or a fixed dollar amount.  There are a couple of blah-blah-blah requirements, such as "the hiring incentive is a major factor in the applicant's decision to go forward", where they just wave their hands and it is so.  There is one limitation, the new employment may not be due to jobs being relocated within Indiana.

So, for those who curse paying taxes...  here's what is going to happen.  Just like already happened with regular abatements with standard rules applied by the State, there will be an all out bidding war between cities and counties.  Places like Lawrence and Hendricks County will likely lead the race to see who can give out the biggest and best tax incentives, until it is not competitive for any other city or county in Indiana to refuse to give the store away, too.

Ten years folks.  Ten years - where all of the increased property taxes and all of the increased COIT/LOIT revenues will be turned over to the business on that property.  This is irresponsible.  Any city or county that utilizes these new laws (and all will), does not have any right to cry and moan about constricting tax revenues and tight budgets.  If they make any cutbacks, they should be required by the public to explain how they then could afford this kind of corporate welfare.

The Indiana Legislature did a lot of damage this past session.  A lot of damage.

Games with COIT, LOIT, PST and Library Funding

I don't know what actually takes more slight of hand, the movement of dollars from one fund to another that are said not to be possible, or the explanation of why it can't be done in similar situations.  Fully funding the Indianapolis-Marion County Public Library is a prime example of this slight of hand.

Just last year, the City-County Council filled $1.0 million of a $1.8 million shortfall, with money laundered from the Ameriplex TIF District - money that had been sitting in the TIF District fund to act as a reserve to satisfy bond holders.  At the time, Councillors like President Ryan Vaughn, stated that they could not cover the remainder of the Library's shortfall with money from the Consolidated Downtown TIF District, even though it was exactly the same type of situation and even though they had just managed to pull $8 million a year from that TIF to pay more money to the Pacers.

Earlier this year, with much show and fanfare, the Council passed a resolution urging the Indiana State Legislature to grant them the power to send some County Option Income Tax revenues to the Library in future years.  The Legislature indicated that the City already had that power, but reaffirmed it with new legislation.  Now that the City and the Council has that power, Councillor Vaughn and others are making noises that indicate they will not split the COIT revenue with the Library anyway.

IBJ reporter, Francesca Jarosz, has a good article in the current IBJ that goes into the COIT - Library - IndyGo funding issue pretty well.  I agree with Councillor Jackie Nytes' position, captured in the final two paragraphs of the piece:

Jackie Nytes, a council Democrat, said giving the library even a small share of income taxes this year is important in setting a precedent.


“We recognize there is a need as a show of faith to find a way to begin that sharing of income taxes,” Nytes said, “even if the initial allocation may be more symbolic than substantive.”

I decided to look at the 2011 City-County budget to see where the City and County income tax money was going, just to see what I found.  I looked at the budget breakdown "2011 Council Adopted Revenues by Subobject by Fund" and "2011 Council Adopted Revenues by Fund by Subobject".  Click here for page with links to a variety of ways to dissect the budget.
 
But, first, a step back to explain that there are three separate taxes revenue streams that combine to total all of the income tax collected in Marion County.  There is the County Option Income Tax (COIT).  There is the Local Option Income Tax Property Tax Make Up (LOIT).  There is the Public Safety Option Income Tax (PST).  Some will tell you that the PST is dedicated to public safety an cannot under any circumstances be used for anything else.  But, that is not the case and in 2010 it was in fact redirected for use anywhere on anything to benefit the final City-County budget both in 2010 and in 2011.
 
In 2010, $21.1 m of COIT money and $13.3 m of PST money were put into the County Rainy Day Fund, where they were essentially laundered so that they could be used for any expense.  $17.3 m was transferred out that year and $17.5 m transferred out to benefit the entire budget.
 
So, for just 2011, how is COIT, LOIT, and PST being spent?
 
COIT:
Fire fund -- $40.4 m
IMPD fund -- $79.2 m
County General Fund -- $6.4 m
MECA fund -- $6.8 m
 
LOIT:
Consolidated County fund -- $2.6 m
Parks fund -- $2.1 m
Redevelopment fund -- $55 k
Solid Waste Collection fund -- $3.1 m
Fire fund -- $8.8 m
IMPD Fund -- $4.8 m
County General Fund -- $13.9 m
 
PST:
Public Safety Income Tax fund (from City's take of PST) -- $29.9 m 
Public Safety Income Tax fund (from County's take of PST) -- $20.6 m
 
These funds are then the sources of money that go into each departmental budget.  The grand total of income tax revenues for the City-County in 2011 comes to $218 million.  Surely the Library is important enough to the powers that be, regardless of party, to send less than 1% of the income tax revenue to help make Indianapolis a great place to live.
 
But, somehow I expect there will be more slight of hand trying to explain why COIT, LOIT, and PST cannot be shared with the Library than prestidigitation in making it happen.