CHICAGO — The Indiana General Assembly began debate this week on a slew of legislative proposals to reform the state’s property tax system as lawmakers reconvened for a 2008 session that they vowed would end with significant property tax reform.
Hours after returning to work Tuesday, legislators in both houses called public hearings and debated bills that would dramatically reduce — and in one case, completely eliminate — property taxes through a variety of measures that include eliminating local government positions and restricting local government spending.
And as debate began, representatives from local governments were shaping up to be among the loudest critics of the proposals, which would result in sharp revenue drops for most counties and townships across the state.
The House Ways and Means Committee heard testimony on its massive HB 1001, which contains nearly all of Gov. Mitch Daniels’ property tax reform proposals.
The bill would raise the sales tax to 7% from 6%, require voter approval on bond proposals higher than $10 million, and give counties the ability to raise local income taxes by 1%. The reform is expected to cut most homeowners’ bills by one-third and result in a loss of $6 billion of annual revenue.
Senate committees passed a series of smaller bills, many of which are also contained in HB 1001. The Senate Appropriations Committee passed a bill that would require the state to pay for local school general funds and child welfare funds, as well as a bill that would put the requirement in the constitution. Another Senate bill would extend the deadline that homeowners could apply for property tax deductions.
The Senate Rules Committee voted in favor of a bill that would eliminate all township assessors and replace them with one elected assessor for each county. The committee also held a hearing on a bill that would completely eliminate all property taxes — a bill that both Senate and House Republicans support as a long-term goal.
Meanwhile, mayors, school district officials, and other local representatives emerged as the most vocal opponents of the bill during House committee testimony. South Bend Mayor Stephen J. Luecke told lawmakers that the city stands to lose $25 million of revenue if the bill is enacted. “This is a loss of one-third of our property tax revenue,” Luecke said.
South Bend would lose 45% of its tax increment financing district revenue if the bill became law — forcing the city to look elsewhere to make payments on TIF-revenue backed bonds, he said.
“We won’t be able to make existing bond payments in three TIF areas,” he said. “Now, of course I know we need to make those payments, so we’d need to take funds from other services, and it would bring development to a screeching halt.”
