Indiana Gov. Mitch Daniels last week warned Gary officials not to expect help from the state as the city struggles with a growing deficit that the mayor said could leave the city bankrupt by Oct. 1.
Daniels’ warning comes a few weeks after Gary Mayor Rudy Clay implemented 20% pay cuts for city employees as well as other cuts, including deep reductions in the number of on-duty firefighters.
The estimated $13 million deficit — which city officials said stems mostly from uncollected taxes and flawed property assessments — is expected to worsen under sweeping new property tax reductions implemented this year. Under the new law, most municipalities will see their property tax revenue cut by about one-third.
In an interview with local media in northwest Indiana near Gary, Daniels admitted that the financially struggling city would likely be the hardest hit under the new legislation. But he said until Gary officials prove that “they’ve done everything they can do for themselves,” the state will likely not step in with relief.
Starting in 2009, Gary and other municipalities — many of which are also predicting big deficits — can appeal to the newly created Distressed Unit Appeal Board for help.
Officials said the city also is suffering from Lake County’s decision late last year to reject a proposal to pass a local income tax. Lake County is the only county in Indiana without a local income tax, and most counties are raising those taxes to compensate for expected huge declines in property tax revenue under the new law.
Meanwhile, Gary has cut on-duty firefighters to 24 from its usual staff of 71, leading the firefighters’ union president to say the department would not be able to handle a major fire.
As the state’s new property tax cuts take effect, Gary could face a $35 million shortfall in 2009 and might have to cut its budget in half by 2010, according to reports.
