Facing possible bankruptcy, Gary officials last week lobbied an Indiana appeals board to raise existing property tax caps on business owners to generate badly needed new revenue for the struggling former steel mill hub.

City officials asked the Indiana Distressed Unit Appeals Board to raise tax caps for businesses to 5.4% in 2009, 4.7% in 2010, and 4.1% in 2011. Under current state, law business owners’ property tax bills can’t be higher than 3% of the property’s assessed value.

The appeals board did not rule on the request, though chairman Ryan Kitchell, who is also director of the Indiana Office of Management and Budget, said the request could drive businesses out of the city, according to local reports.

Located in Lake County, Gary could be faced with cutting its 2009 budget in half. In addition to a weak economy, its problem in part stem from the new state law that caps property taxes for homes, rental properties, and businesses. The law was enacted last year and is expected to mean a big revenue drop for local governments. To compensate, the state enabled counties to impose a local income tax. Lake County is the only one of the state’s 96 counties to decline to impose the tax.

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