House Enrolled Act 1001, the property tax relief plan approved by state lawmakers last spring, puts stricter caps on property taxes paid by different classes of property owners. That's good for homeowners, theoretically, who are meant to be the beneficiaries of the change. Going forward, the caps and other changes in HEA 1001 will likely result in reductions in their property tax bills, the taxes they pay based on the value of their homes.
But it appears the varied changes, notably the caps, will likely put strains on many local governmental units, correspondingly reducing the amount of property tax revenue coming in to help pay for the services they provide. Indeed, such reductions could necessitate cuts in services, layoffs, hiring freezes and new fees as impacted cities, towns, school districts and other entities scramble to make up for their shortfalls. The city of Elkhart is particularly hard hit.
Elkhart County contracted H.J. Umbaugh and Associates to help break down the issue here in Elkhart County and following are their estimates, using planned 2009 budgets as the basis for 2010 projections. The biggest hit comes in 2010 and listed are those entities expected to lose more than $10,000 that year.
Taxing entity Loss of property Loss of property
tax revenue due tax revenue due
to caps, 2009 to caps, 2010
City of Elkhart $1,450,738 $4,637,244
Elkhart schools 1,014,306 3,036,743
Elkhart County 487,108 1,949,905
Concord schools 209,898 1,304,640
Goshen schools 304,990 1,287,657
City of Goshen 284,407 1,265,788
Wa-Nee schools 134,869 611,147
City of Nappanee 118,871 484,135
Elkhart libraries 121,731 425,779
Middlebury schools 11,051 239,513
Concord Township 19,839 154,596
Goshen libraries 27,660 122,869
Town of Middlebury 5,530 107,179
Nappanee libraries 25,117 102,613
Town of Wakarusa 5,623 70,357
Middlebury Township 2,823 61,434
Town of Bristol 0 43,314
Fairfield schools 2,652 34,521
Town of Millersburg 1,805 23,043
Elkhart Township 3,473 15,268
Baugo schools 0 12,184
Osolo Township 404 10,578
The property tax caps limit homeowners' property taxes to 1.5 percent of their homes' assessed valuations in 2009 and 1 percent in 2010. For instance, taxes on a home valued at $100,000 in 2010 couldn't exceed $1,000. The limits are 2.5 percent and 3.5 percent in 2009 for rental units and commercial property, respectively, then fall to 2 percent and 3 percent.
Property taxes are just one source of revenue, though a notable one, that government taps to help pay for its operations. Income taxes and fees are other sources, as well as sales taxes at the state level.