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County council discusses food and beverage tax, new local option income tax

The Elkhart County Council will approach state lawmakers to talk about a potential countywide food and beverage tax and a new local option income tax.
Posted on Nov. 2, 2013 at 1:00 a.m. | Updated on Nov. 2, 2013 at 6:19 p.m.

GOSHEN — Leaders in Elkhart County have a lot of things to talk about with state legislators, but at the top of the list are two new taxes — a potential countywide food and beverage tax, as well as a new local option income tax to offset problems stemming from property tax caps.

County commissioner Mike Yoder made a pitch to members of the Elkhart County Council on Saturday, Nov. 2, to gain their support to talk with state lawmakers about sponsoring legislation.

Following in the footsteps of the city of Goshen, county councilman Tom Stump said he would like to explore a food and beverage tax for the county. The city council passed a resolution earlier this year to lobby representatives for a 1 percent tax.

“Historically, the county food and beverage taxes have been tied to a specific capital project,” Goshen mayor Allan Kauffman told the county council. “Allen County, it was the coliseum, and when they paid that off, they transferred it over to the convention center. The ones that have been approved for cities in recent years have been more general, like public safety or economic development or general use, but not tied to capital projects. To my knowledge, this would be the first countywide one that would have a more broad use.”

Yoder said the county needs to begin closing a hefty financial gap that has been created by property tax caps and declining assessed valuations. The caps, also known as the circuit breaker, limit what property owners have to pay in taxes.

It could be 2018 before the county makes a noticeable dent in its shortfall, Yoder warned.

“At some point, we need to face reality that we’re not going to recover as quickly as we wanted,” he said.

There are three local option income taxes available to the county, Yoder said.

“None of them are particularly good,” he added. “We could increase local option taxes by 1 percent, which would generate property tax relief, which reduces circuit breaker losses. We could pass a levy freeze, which everybody agrees is not a good idea, and then if we pass one of those, we can do a .25 percent increase for public safety.”

The county needs a fourth option, Yoder said.

“It’s unique in a sense that it’s a disappearing tax, and we’re calling it a circuit breaker relief local option income tax,” he explained. “It’s really very impressive. It not only helps counties and the cities and the towns and the libraries and parks, but it also helps the schools out. I shared this with the school superintendents this week, and I have 100 percent support from them on this particular tax.”

The circuit breaker relief income tax would add up to 1 percent based on the county’s total property tax losses.

“As it happens to work out, this year our total circuit breaker losses in Elkhart County are $37 million for all units,” Yoder said. “A 1 percent local option income tax raises right at $37 million, so this would be a worst case scenario. Next year, if the circuit breaker losses are lower, that local option income tax rate would be lower. If we truly grow out of this, then that tax would go away.”

County councilman David Foutz worries that a fourth option could be hard to sell to his constituents.

“I know that this is going to be a difficult play for the public because it sounds like we’re passing contravening legislation to take away what people voted to get,” he said. “I’m just saying what I’m going to be seeing in the public arena.”

Nonetheless, Stump said the county council must find a way to replace funds lost because of property tax caps and problems with assessed valuations.

Yoder said he knows of at least one legislator willing to sponsor a countywide food and beverage tax, adding that he’s meeting with more lawmakers in two weeks to discuss the fourth local option income tax. Yoder said the county could even consider hiring a lobbyist to make sure the two initiatives are included in the next legislative session. The county council and commissioners plan to discuss the two taxes again in February.


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