CHICAGO — The Indiana House yesterday approved Gov. Mitch Daniels’ massive property tax reform proposal after inserting a number of Democrat-sponsored amendments into the bill, including one that dramatically weakens the Republican governor’s requirement of a voter referendum for borrowing plans.
The legislation now moves to the Senate, which this week approved a number of smaller bills that encompass similar reform proposals — including a pair of bills that restrict how bonds can be structured and refunded.
Daniels and state lawmakers have named property tax reform the top priority for the year, and are pushing to enact the massive legislation by the end of February. The measure passed yesterday would reduce most homeowners’ property tax bills by one third and cap local governments’ spending based on local income growth.
Under the bill, the lost property tax revenue would be replaced in part with a 1% sales tax increase — estimated to generate an additional $1 billion in 2009 — as well as counties’ ability to raise the local income taxes by 1%, which could raise another $1 billion statewide if all counties implemented the increase.
Several of the amendments, chief among them the one weakening the referendum requirement, attracted the ire of Republicans. Sponsored by Rep. David Niezgodski, the amendment removes the original language requiring voter approval of most bond issues. The new bill now calls for a referendum only on certain recreation-related projects, such as swimming pools and school stadiums.
“We have a local process right now where we can determine if a [new] school is necessary, and we have a process of remonstrance if people object,” Niezgodski said in a later interview. “We don’t want to have unnecessary delays in moving the process forward.”
The amendment was approved by a vote of 50 to 44 along party lines, and marked one of the few heated partisan debates of the deliberation on the measure.
The issue will likely continue to be a contentious one, as the Senate Tuesday voted 31 to 16 to pass a measure enacting Daniels’ more stringent referendum process, although that bill makes an exception for growing school districts.
The House also voted to set up a $150 million rainy-day fund for college tuition support and school transportation costs.
“There’s a lot more positive here than not, and this is the only game in town right now,” House Minority Leader Rep. Brian Bosma said prior to the full vote on the bill, which passed 93 to 1. “I’m pleased to join across the aisle and say this is a step in the right direction. Hopefully we’ll address some of these shortcomings in the weeks ahead.”
Meanwhile the Senate this week passed two bills designed to restrict local bond issues. Under the measures, the maximum term of bonds can be no longer than 30 years, and the maximum maturity length of tax increment financing bonds would be reduced to 25 years from 50 years.
Outstanding bonds can only be refunded if there is a savings, and not for restructuring purposes where final maturities are pushed out. Savings from refundings must be used to repay those bonds or reduce levies instead of being used to launch new projects. In addition, all bond issues — not just those greater than $3 million, as under current law — will be subject to approval by the jurisdiction’s local legislative body.
