Elkhart County leaders have few options in countering property tax cap losses

Don't expect a new local option income tax to help local cities and other taxing units deal with revenue losses brought on by property tax caps.
Posted on March 27, 2013 at 1:00 a.m. | Updated on March 27, 2013 at 5:05 p.m.

Don’t expect a new local income tax to help offset the reduced property tax funding entering the coffers of local cities and towns, Elkhart County and other governmental units.

That topic has been discussed previously as local governmental units wrestle with reduced property tax revenue brought on by tax caps. “But every time we’ve talked about it, we’ve said no,” said Elkhart County Council President John Letherman.

Goshen Mayor Allan Kauffman, for one, expressed a measure of support for a new income tax, but he’s not holding out hope. The county council would be the body responsible for implementing a new tax.

“We’re in favor of that but the probability that the county is going to do that isn’t great,” Kauffman said.

Currently, the collective income tax rate in Elkhart County totals 1.5 percent, with the revenue generated shared among Elkhart County government, the cities and towns here and other taxing units.

As reported in The Elkhart Truth earlier this week, property tax funding going to 25 of the 37 taxing units in Elkhart County fell between 2010 and 2012, confirming what local officials have been fretting about in recent years. At the same time losses due to property tax caps — funds property owners were able to keep in their pockets — increased in 34 of the 37 units, with more losses anticipated this year.

It’s been a standing issue, ever since the Indiana legislature implemented tax caps in 2008, meant to provide tax relief to property owners and force local units of government to trim spending. And it’s got Elkhart, Goshen and Elkhart County leaders worried, along with their counterparts in the Elkhart, Goshen and Concord school systems, also reliant on property tax funding.

Most officials agree some trimming was in order, but they worry more cuts on top of those already made will be necessary with continued dips in property tax revenue, stressing their ability to operate. Road maintenance will suffer, repairs at schools will have to be put off, vital services will be scaled back, jobs will be eliminated.

Despite it all, Letherman isn’t too worried just yet. Elkhart County has tapped unused reserves to help offset declining property tax revenue.

“We shouldn’t look at this as we’re going broke, because we’re not,” Letherman said.

Still, reserves can only go so far and Kauffman ruefully notes that implementing a trash-collection fee instead of using property tax funds to cover trash-collection costs would go a long way in helping the city. Goshen and Elkhart officials last year discussed implementing trash fees to offset property tax losses, but both cities eventually nixed the idea.

“That trash fee would basically replace the extra loss we weren’t anticipating this year,” Kauffman said. Goshen is expected to lose $3.75 million to tax caps this year, according to an estimate from accounting firm Umbaugh & Associates, up from $2.67 million last year.


The growing circuit breaker losses stem in part from the declining net assessed valuation of Elkhart County property, a collective $6.85 billion for 2013 compared to $7.05 billion for 2012, according to Umbaugh. Property tax calculations are based on a property’s assessed valuation and if that value falls, the property tax funding that can be squeezed from the real estate goes down too.

With Umbaugh expecting the county’s overall assessed valuation to keep falling through at least 2015, revenue from property taxes will likely keep dipping. And even if assessed valuations — measures of a property’s worth — reverse course, Kauffman estimates it could take perhaps 10 years to get back to pre-recession levels, suggesting continued budget scrambling in years to come.

“It’s going to be a long time to get back to where we were,” Kauffman said.

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