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Study shows Elkhart would benefit from annexation

Posted on Aug. 22, 2013 at 1:00 a.m. | Updated on Aug. 22, 2013 at 6:17 p.m.

GOSHEN — The city of Elkhart would come out a winner in a hypothetical annexation outlined in a financial study presented to the Elkhart County Redevelopment Commission.

After hearing that Elkhart’s compact fees for out-of-town utility customers could become a “barrier to new development” in the county, redevelopment commission president Mike Huber said the board hired a consultant to explore the impact of annexation of land into the city. H.J. Umbaugh and Associates, a financial consulting firm with offices in Mishawaka, Indianapolis and Lansing, Mich., was tasked with the report and presented the final results on Thursday, Aug. 22.

A coalition of businesses began complaining loudly in January after the city passed an ordinance that would shift 75 commercial customers from a sewer service agreement to compact fees that 63 other companies had been paying on for years. Sewer service agreements charged customers 300 percent of the city sewer rate, but the compact policy, which has been based on assessed property value, generally charges a higher monthly fee. Some companies have complained that the compact fee, currently based on 75 percent of assessed value, is excessive.

The Umbaugh report used a hypothetical scenario of an annexation by the city of Elkhart of land in Osolo Township with assessed values totaling $25 million. The properties in the study are part of a commercial tax increment financing, or TIF, district with revenues committed to the county through a bond or lease agreement.

The study demonstrates how an annexation under those circumstances would impact government budgets, TIF revenues, compact fees, tax cap losses and property tax levies and rates.

For example, if the city were to annex the properties illustrated in the study, Elkhart would gain almost $204,000 in revenues annually after compact fees are taken off the table and the impact of property tax levies and other financial sources are figured in.

The Umbaugh study shows that Osolo Township, Elkhart Community Schools, Elkhart Public Library and the county’s redevelopment commission would all see a reduction in tax allocations after annexation. The city, on the other hand, would gain $382,476 in property taxes each year, though it would no longer collect $166,189 in compact fees for sewer service.

Umbaugh anchored its analysis on a compact fee that follows a 35 percent model based on assessed values recommended by a task force that studied the issue this summer. Huber noted Thursday that the county redevelopment commission does not endorse a particular formula for the city to follow for charging out-of-town utility customers.

The city council and Mayor Dick Moore continue to wrangle in hopes of finding a compromise. Moore has offered to significantly reduce the formula used in the assessed value calculation, but most Republicans on the city council have demanded the policy shift to a surcharge based on usage.

The council approved an ordinance earlier this month that would switch commercial customers outside of the city to a 15 percent surcharge, but Moore vetoed the measure. Officials on both sides are still looking for a compromise.

While the dispute lingers, the Moore administration has already begun initial steps toward annexing many of the commercial customers that are contiguous to city limits.

Truth reporter Dan Spalding contributed to this article.