CHICAGO -- An Indiana town has declared a financial emergency, warning that it could be broke by May 1.
The declaration comes after years of persistent general fund deficits in Connersville, a town of 13,000 about 60 miles east of Indianapolis that's the seat of Fayette County.
The town was once known as "Little Detroit" for its automobile manufacturing industry.
But it's suffered major property tax revenue declines since 2008, Mayor Leonard Urban told city leaders and local reporters last week.
Part of the problem is the 2007 closure of a major automobile supply plant, Urban said, which led to the loss of $3 million in property tax revenue. The city's position has been further strained by statewide property tax caps implemented in 2009 under then-Gov. Mitch Daniels.
"I knew this was coming, but I never dreamed it would come upon us this quick," Urban was quoted in local reports as telling city officials.
"We've been really broke for six or seven years," he said. "We won't make it until the June tax draw."
Declaring a financial emergency gives Urban and the city treasurer greater power to make cuts.
Officials said they plan to impose a series of reductions, including limits on public safety overtime, and that they may borrow from a capital development fund in order to make the May payroll.
Police response times may slow, officials warned, and layoffs would be the next step.
Connersville's treasurer said the city would have less than $15,000 in its general fund as of May 1, according to reports. Monthly expenses are around $700,000.
Many Indiana local governments have reported feeling the pinch since the enactment of statewide property tax caps. Local revenue could be further cramped by recent passage of legislation that could mean a decline in personal property taxes, a $1 billion a year revenue stream that flows to municipalities.
But Connersville's situation remains pretty unique nationally, said Marc Joffe, a consultant at muni finance data collection firm Bitvore Corp.
"I think we've gotten over the worst of the muni bond problems," Joffe said. "You're always going to see some small city or town popping up with these types of problems, probably because of some hyperlocal situation. It shows that bond investors need to look at various resources."
The city has roughly $12 million of bond debt outstanding. Most of it appears to be unrated.
Most recently, in 2013, the city issued $1 million of economic development income tax revenue bonds.
That debt is also unrated, and there is no official statement posted on the Municipal Securities Rulemaking Board web site.
