Elkhart County’s cities, towns, schools and libraries would lose a large chunk of change if Gov. Mike Pence’s proposal to ax the personal property tax goes through.
The various governmental units would lose $23.04 million in revenue in 2015, according to a report from the Indiana Legislative Services Agency, or LSA. The city of Elkhart would take the hardest hit in dollar terms, a $4.78 million loss.
But the city of Goshen, Elkhart County and the Elkhart, Concord and Goshen school districts would also see losses in the millions and it’s got local officials bracing themselves. They’re worried about dwindling revenue sources, questioning the wisdom of Pence’s plan, wondering if they’ll have to tap rainy day funds again or scale back services.
On top of losses in recent years stemming from caps on real property taxes, the loss of personal property tax revenue would create “an impossible situation,” said Elkhart County Commissioner Mike Yoder. Elkhart County government stands to lose $2.39 million in 2015 if the personal property tax is eliminated, on top of $4.58 million in tax cap losses.
The governor’s proposal is “very, very concerning,” said Wayne Stubbs, superintendent of Concord Community Schools, which, like other school districts, has already faced some serious belt-tightening. The Concord district would lose $1.53 million in personal property tax revenue next year, on top of $4.32 million in tax cap losses.
By eliminating the personal property tax — and thus reducing the cost to do business here — Pence aims to spur business growth in the state. Unlike real property taxes, applicable to land and buildings, the personal property tax applies to business machinery and equipment, and in 2015, if left alone, it will generate an estimated $1.06 billion statewide, according to the LSA.
Pence’s proposal, which has generated plenty of questions and debate, still has to be fleshed out during the state legislative session, which starts Monday, Jan. 6. There’s been discussion of some sort of provision to offset the losses local governmental units would experience, but nothing formal. On its own, though, eliminating the tax — partially countered by corresponding increases in real property taxes — would lead to a collective loss of $687.16 million by local governmental units across the state, LSA numbers show.
The $23.04 million estimated loss by Elkhart County governmental units is the seventh biggest dollar amount among Indiana’s 92 counties.
‘NOTHING LEFT TO CUT’
Aside from Yoder and Stubbs, local officials leery of axing the personal property tax include Goshen Mayor Allan Kauffman and Arvis Dawson, executive assistant to Elkhart Mayor Dick Moore.
Caps on real property taxes, phased in starting in 2009, have had a significant impact, reducing revenue coming into local government coffers by a collective $36.37 million in 2013 alone, according to the LSA. That’s more money left in taxpayers’ pockets, but it’s resulted in some serious belt-tightening over the last few years by the county, cities and school districts. Even the library systems and township government, also reliant on property tax funds, have felt the pinch.
The loss of personal property tax funds on top of tax cap losses, Yoder worries, would force Elkhart County government to wipe out its already-dwindling rainy day fund, meant to cover emergencies. It would make the county divert yet more economic development income tax funding from its intended use, road maintenance.
Taken to the extreme, it would even push the county closer to considering an increase in the local option income tax, or LOIT, something officials have debated but thus far avoided.
“We’re just out of options. There’s nothing left to cut,” Yoder said.
LOCAL LAWMAKERS HAVE DOUBTS
State Rep. Tim Neese has heard from business operators who favor the governor’s proposal. The cut would mean more money in their pockets. He’s also heard from elected officials in Elkhart County critical of the plan, “and I understand that opposition,” he said.
Neese, an Elkhart Republican, awaits more information on the gubernatorial proposal before offering a firmer position, and other lawmakers, likewise, seek more concrete details. Still, there seem to be plenty of doubts and question marks.
Indiana Sen. Carlin Yoder, a Middlebury Republican, doesn’t think local governmental units are “in any shape to lose that money.” Likewise, Rep. Rebecca Kubacki, a Syracuse Republican, said she’s “very sympathetic to our mayors and county council,” alluding to the concerns they’ve expressed to her.
If it’s a matter of replacing local government’s lost personal property tax funds with money diverted from another source, Carlin Yoder wonders what the point is, a view echoed by Rep. Wes Culver.
“If it’s a swap, I think it’s a waste of time,” said Culver, a Goshen Republican. Culver, moreover, questions Pence’s contention that eliminating the tax will spur business growth and wonders where the proof is.