Annexation and Property Tax Rates 101

Screenshot 2017-03-07 19.05.08Introduction

As readers have no doubt heard, the City of Bloomington recently proposed to annex 7 areas of unincorporated territory in Monroe County, leading to a 65% increase in the area of the City. The City’s case for annexation (including maps and their fiscal plan) can be found here: http://bloomington.in.gov/annex.

I have developed a presentation that I have given in different forms at several community meetings about the annexation that deals specifically with the impact of annexation on property tax rates on annexed areas. Several constituents have suggested that I turn that presentation into a blog post, so this is my first attempt.

These annexations will have many effects on the community, the public, and other units of government (the county, townships, fire departments). The purpose of this presentation is to educate the public specifically on the likely effects of these annexations on property tax rates and property tax bills.

Big Disclaimer: This is based on what we know as of February 2017. This is not an official government document, and is only for community education and discussion. Your circumstances may vary — and many things can change between now and 2020.

Basic Terminology

A taxing unit is a unit of government that independently has the authority to levy property taxes. Monroe County includes the following taxing units:

    • Monroe County Government
    • School Corporations (MCCSC, R-BBSC)
    • Townships (Bean Blossom, Benton, Bloomington, Clear Creek, Indian Creek, Perry, Richland, Salt Creek, Polk, Van Buren, Washington)
    • Monroe County Public Library
    • Municipalities (Bloomington, Ellettsville, Stinesville)
    • Fire Protection Districts (Perry-Clear Creek Fire Protection District)
    • Monroe County Solid Waste Management District
    • Bloomington Transportation (the city bus is actually a taxing unit separate from the City of Bloomington)
    • Lake Lemon Conservancy District (only affects a small number of residents)

A taxing district is made up of all of the taxing units that provide services to a common geographical area. Property tax rates are uniform to all parcels within a taxing district. And property tax rates for a taxing district are simply the sums of all of the tax rates for all of the taxing units serving the district.

For example, tax rates for an unincorporated taxing district (i.e., a taxing district outside of one of the 3 incorporated municipalities of Bloomington, Ellettsville, and Stinesville) consist of:

= County Rate + Solid Waste District Rate + Public Library Rate + School Corporation Rate + Township Rate + (if in Perry or Clear Creek townships only) Perry Clear Creek Fire Protection District Rate

Tax rates for an incorporated taxing district (a taxing district within an incorporated municipality) consist of:

= County Rate + Solid Waste District Rate + Public Library Rate + School Corporation Rate + Township Rate – the fire protection component of the township rate + Municipal Rate + (if Bloomington) the Bloomington Transportation Rate

So basically the difference between unincorporated and incorporated rates are:

  • the fire protection component of the township tax rate (taxpayers don’t pay it in cities and towns, because fire protection is provided by the municipality)
  • the municipal tax rate (taxpayers don’t pay it outside of cities and towns)
  • Bloomington Transportation (taxpayers in the City of Bloomington pay a property tax rate for the city bus)

The following table shows the property tax rates for each of the taxing districts, from 2013-2017.

Screenshot 2017-03-07 07.24.46

Probably the thing you will notice first about this chart is the substantial increase in tax rates for unincorporated Bloomington Township (23.73%) and Washington Township (48.49%). These large increases are due to the newly created Northern Monroe Fire Territory, which upgrades the fire protection services provided to Bloomington and Washington townships.

Property Tax Rates and Annexation

Next I’m going to walk through the property tax rate calculations for three different townships: Van Buren, Richland, and Perry. The general format will be the same for each of these townships; only the numbers will change, so you probably won’t need to read through each one of them.

Also, I want to make sure to call attention to a couple of caveats/assumptions about the data.

This first caveat is worth spending a bit of time on. I am assuming that the City of Bloomington taxing unit’s property tax rate remains the same after annexation. To understand why this is an important assumption, consider how property tax rates are calculated: for most operating funds, the tax rate equals the tax levy (the amount collected in property taxes) divided by the total net assessed value of the area served by that levy. It is expressed in a rate per $100 of assessed value. If the levy stays the same and the assessed value served increases, then the tax rate naturally decreases.

The levy (technically the maximum levy — a unit can always choose a levy lower than the maximum, but in practice most units use the maximum) normally is only allowed escalate by a certain amount each year determined by the state. For 2017 that amount was 3.8%.

If a municipality annexes additional territory, they are permitted to automatically increase their maximum levy by the same proportion that their assessed value is increasing, under the theory that if the assessed value increases by X% then the cost of providing services presumably increases by X% — up to 15%. Above 15%, the municipality has to petition the Indiana Department of Local Government Finance (DLGF) to give them an excess levy.

In this case, the 7 proposed annexations add up to a total 28.14% increase in assessed value. The City’s own fiscal plan for the annexation (p.69) makes clear that they are assuming that they will receive a corresponding 28.14% increase in their maximum levy. See the table below from the fiscal plan:

Capture

If the City receives this full excess levy, then the tax rate won’t change (because the levy AND the assessed value would be increased by the same factor, canceling each other out). If the City were to receive less than the full 28.14% excess levy, then the levy would increase by less than the assessed value under annexation, and thus the tax rate for the City of Bloomington would decrease; however, they wouldn’t have as much revenue as projected in the fiscal plan, and it isn’t clear that they would be able to provide the necessary services.

In these  calculations, however, I’m going with the City of Bloomington’s own assumption — that they will receive the full 28.14% increase in their levy to go along with the 28.14% increase in their assessed value.

Van Buren Township

The Van Buren Township taxing district’s 2017 property tax rate is $1.4645 per $100 of assessed value. That rate comprises the following:

Presentation on Property Tax Rates (1)

The township component of the tax rate ($0.3094  per $100 of assessed value) is actually made up of multiple components.

Presentation on Property Tax Rates (2)

Annexed residents don’t pay the fire component of the township tax rate ($0.2364). However, they still do continue to pay any fire debt until the debt is paid off.

And — annexed residents now pay two new tax rates: the Bloomington Civil City tax rate (actually, a little bit less — see below) and the Bloomington Transportation (city bus) rates. The two city rates are shown below.

Presentation on Property Tax Rates (3)

The one exception I just mentioned is that newly annexed residents don’t inherit the City’s existing debt before annexation. The following diagram illustrates the proportion that debt adds to the rate:

Presentation on Property Tax Rates (4)

So newly annexed taxpayers, in addition to the other taxes (County, schools, library, etc.) will pay the Bloomington Civil City rate of $0.8627 minus the debt rate of $0.0281 = $0.8346, along with the Bloomington Transportation rate of $0.0354 for a total of $2.0981 per $100 of assessed value.

Screenshot 2017-03-07 19.00.28

The following diagram compares the tax rates pre-annexation to post-annexation for Van Buren Township: an increase of $0.6336, or a 43.26% increase.

Screenshot 2017-03-07 19.02.51

Also note that these rates do not include any additional debt that the City of Bloomington will likely have to take on in order to provide infrastructure to serve the newly annexed areas. The City states in its fiscal plan (p.34) that it will need to bond these capital expenses, but does not include the additional tax rate needed to service this debt in its own estimate of tax rates.

So what do these post-annexation tax rates look like on an individual’s tax bill in Van Buren Township? I did a tax bill simulation on a couple of different scenarios here to illustrate the effects. Again, I’ll give a couple of caveats: First, this assumes that the annexation takes effect immediately; many things could happen between now and 2020. Second, these examples assume that the income tax collected for homestead property tax relief has the same effect on an individual’s tax bill as in 2016. These numbers don’t include any amount for additional City debt to pay for infrastructure for the newly annexed areas. And finally, there are some protections against substantial increases in property taxes for taxpayers over 65 years of age whose income and assessed value meet certain guidelines.

Screenshot 2017-03-07 19.12.09

 

Screenshot 2017-03-07 19.12.26

 

Screenshot 2017-03-07 19.12.35

As you can see, at around $250,000 of assessed value, the constitutional circuit breakers (“tax caps”) kick in. This keeps the increase in taxes down for the taxpayer — but causes other units like the school district, the public library, and the county to lose money. This is an important aspect of the tax caps to understand — the City, by raising taxes to a degree that causes the tax caps to kick in can actually cause other units like the schools to lose revenue. Not just not increase revenue by as much, but actually to see a reduction in revenue.

Finally, let’s look at a business:

Screenshot 2017-03-07 19.12.45

Richland Township

In this section, I’ll repeat the same argument that I did for Van Buren Township, so unless you are specifically interested in the numbers for Richland Township, you can skip this section. The one thing that is different about Richland Township is that because Richland-Bean Blossom School Corporation does not have the referendum tax rate that MCCSC does, it takes a much lower assessed value for properties to hit the circuit breakers (the referendum tax rate is exempt from the tax caps).

The Richland Township taxing district’s 2017 property tax rate is $1.7915 per $100 of assessed value. That rate comprises the following:

Screenshot 2017-03-07 19.21.02

The township component of the tax rate ($0.1673  per $100 of assessed value) is made up of multiple components.

Screenshot 2017-03-07 19.21.10

Annexed residents don’t pay the fire component of the township tax rate ($0.2364). However, they still do continue to pay any fire debt until the debt is paid off.

And — annexed residents now pay two new tax rates: the Bloomington Civil City tax rate (actually, a little bit less — see below) and the Bloomington Transportation (city bus) rates. The two city rates are shown below.

Presentation on Property Tax Rates (3)

The one exception I just mentioned is that newly annexed residents don’t inherit the City’s existing debt before annexation. The following diagram illustrates the proportion that debt adds to the rate:

Presentation on Property Tax Rates (4)

So newly annexed taxpayers, in addition to the other taxes (County, schools, library, etc.) will pay the Bloomington Civil City rate of $0.8627 minus the debt rate of $0.0281 = $0.8346, along with the Bloomington Transportation rate of $0.0354 for a total of $2.0981 per $100 of assessed value.

Screenshot 2017-03-07 19.21.36

The following diagram compares the tax rates pre-annexation to post-annexation for Richland Township: an increase of $0.7326, or a 40.9% increase.

Screenshot 2017-03-07 19.21.46

Also note that these rates do not include any additional debt that the City of Bloomington will likely have to take on in order to provide infrastructure to serve the newly annexed areas. The City states in its fiscal plan (p.34) that it will need to bond these capital expenses, but does not include the additional tax rate needed to service this debt in its own estimate of tax rates.

So what do these post-annexation tax rates look like on an individual’s tax bill in Richland Township? I did a tax bill simulation on a couple of different scenarios here to illustrate the effects. Again, I’ll give a couple of caveats: First, this assumes that the annexation takes effect immediately; many things could happen between now and 2020. Second, these examples assume that the income tax collected for homestead property tax relief has the same effect on an individual’s tax bill as in 2016. These numbers don’t include any amount for additional City debt to pay for infrastructure for the newly annexed areas. And finally, there are some protections against substantial increases in property taxes for taxpayers over 65 years of age whose income and assessed value meet certain guidelines.

Screenshot 2017-03-07 19.21.58

Screenshot 2017-03-07 19.22.09

Note that the tax caps kick in with an assessed value of less than $150,000 in Richland Township. This keeps the increase in taxes down for the taxpayer — but causes other units like the school district, the public library, and the county to lose money. This is an important aspect of the tax caps to understand — the City, by raising taxes to a degree that causes the tax caps to kick in can actually cause other units like the schools to lose revenue. Not just not increase revenue by as much, but actually to see a reduction in revenue.

Finally, let’s look at a business, such as one of the many that are located in the westside economic development area in Richland Township:

Screenshot 2017-03-07 19.22.20

Perry Township

In this section, I’ll repeat the same argument that I did for Van Buren and Richland Townships, so unless you are specifically interested in the numbers for Perry Township, you can skip this section. The one distinctive feature of Perry Township is that fire protection is provided by the Perry-Clear Creek Fire Protection District, which is actually an independent taxing unit. The examples in Richland and Van Buren townships had the fire protection provided by the township (although in Richland Township it is provided by contract with Ellettsville Fire Department).

The Perry Township taxing district’s 2017 property tax rate is $1.3315 per $100 of assessed value. That rate comprises the following:

Screenshot 2017-03-07 19.32.05

Annexed residents don’t pay the fire protection district rate ($0.1540).

And — annexed residents now pay two new tax rates: the Bloomington Civil City tax rate (actually, a little bit less — see below) and the Bloomington Transportation (city bus) rates. The two city rates are shown below.

Presentation on Property Tax Rates (3)

The one exception I just mentioned is that newly annexed residents don’t inherit the City’s existing debt before annexation. The following diagram illustrates the proportion that debt adds to the rate:

Presentation on Property Tax Rates (4)

So newly annexed taxpayers, in addition to the other taxes (County, schools, library, etc.) will pay the Bloomington Civil City rate of $0.8627 minus the debt rate of $0.0281 = $0.8346, along with the Bloomington Transportation rate of $0.0354 for a total of $2.0981 per $100 of assessed value.

Screenshot 2017-03-07 19.33.00

The following diagram compares the tax rates pre-annexation to post-annexation for Perry Township: an increase of $0.7160, or a 53.77% increase in tax rates.

Screenshot 2017-03-07 19.33.29

Also note that these rates do not include any additional debt that the City of Bloomington will likely have to take on in order to provide infrastructure to serve the newly annexed areas. The City states in its fiscal plan (p.34) that it will need to bond these capital expenses, but does not include the additional tax rate needed to service this debt in its own estimate of tax rates.

So what do these post-annexation tax rates look like on an individual’s tax bill in Richland Township? I did a tax bill simulation on a couple of different scenarios here to illustrate the effects. Again, I’ll give a couple of caveats: First, this assumes that the annexation takes effect immediately; many things could happen between now and 2020. Second, these examples assume that the income tax collected for homestead property tax relief has the same effect on an individual’s tax bill as in 2016. These numbers don’t include any amount for additional City debt to pay for infrastructure for the newly annexed areas. And finally, there are some protections against substantial increases in property taxes for taxpayers over 65 years of age whose income and assessed value meet certain guidelines.

Screenshot 2017-03-07 19.33.39

Screenshot 2017-03-07 19.33.46

Screenshot 2017-03-07 19.33.56

Note that the tax caps only actually benefit much more expensive properties in Perry Township. But once they take effect, as with other taxing districts, they cause other units like the school district, the public library, and the county to lose money. This is an important aspect of the tax caps to understand — the City, by raising taxes to a degree that causes the tax caps to kick in can actually cause other units like the schools to lose revenue. Not just not increase revenue by as much, but actually to see a reduction in revenue.

Finally, let’s look at a business in Perry Township:

Screenshot 2017-03-07 19.34.05

As you can see, because the circuit breaker limit for businesses is 3%, the circuit breakers have no impact for business properties.

Summary of Tax Rate Changes Under Annexation

Now that I’ve gone through detailed examples for Van Buren, Richland, and Perry Townships, here is a summary of the impact of annexation on the tax rates of all of the unincorporated areas that the proposed annexation affects:

 

screenshot-2017-03-07-19-34-17.png

Potential New City Debt

As I mentioned earlier, the City states in its fiscal plan that it will take on debt to provide infrastructure for the newly annexed areas. It provides 4 estimates of the debt service payments: a maximal and minimal estimate of the total amount required for the capital investment and a 10 year and a 20 year debt service schedule. Using the City’s fiscal plan’s own estimates for the annual debt service payment and their estimate of the additional assessed value from the annexation, I attempted to quantify the additional tax rates required to provide the capital infrastructure necessary to support the annexation:

Screenshot 2017-03-07 19.34.27

As you can see, the debt would add an additional between 2.5 cents and 6.35 cents per $100 of AV. Note that this debt would be paid by all city taxpayers, not just newly annexed taxpayers. In addition, the additional tax rates would have some small additional circuit breaker impact, leading to some additional revenue loss for other units of government.

Conclusion

I hope that if you made it all the way through, you found this explanation of the impacts of annexation on tax rates helpful and informative. I will undoubtedly be writing quite a bit more about annexation and its impacts on taxpayers as well as the county and other units of government such as townships and fire protection districts. If there is something you find unclear or incomplete about this explanation of tax rates, please let me know and I will gladly rewrite or expand!

Transit Tax Passes in Indy

indygo_bus_indiana_aveLast week, the Indy Star reported that a proposed 0.25% local income tax in Marion County to support public transit expansion advanced (the article and my comments are here: Public Transit Income Tax Advances in Indy).

The tax passed the City-County Council last night. This 0.25% income tax will inject an estimated $54M per year into the public transit system, often thought of as one of the nation’s worst for a major city. 6 counties (Marion, Hamilton, Hancock, Johnson, Delaware and Madison) currently have the option of holding a referendum on a local income tax for transit expansion. This tax will bring the total local income tax rate for Marion County from 1.77% to 2.02%.

Today’s Indy Star article: http://www.indystar.com/story/news/local/marion-county/2017/02/27/indy-council-approves-transit-tax/98490222/

 

Public Transit Income Tax Advances in Indy

5858d1eb856ac-imageToday’s Indy Star reports that a proposal for a 0.25% local income tax in Marion County to support public transit expansion passed a key committee vote yesterday, sending the vote to the full City-County Council on February 27th:

http://www.indystar.com/story/news/local/marion-county/2017/02/21/marion-county-transit-tax-gets-committee-approval-heads-full-council/98200340/

Back in November, this tax increase to fund public transit passed in a referendum handily by 59.3% to 41.7%.

In the past we have discussed a potential income tax dedicated to public transit expansion here in Monroe County. The revenues would be shared between Bloomington Transit and Rural Transit, and would potentially fund both expansion of transit within the existing city boundaries (both in terms of additional routes and stops, and potentially more frequent service and/or Sunday service), as well as additional point to point service in the rural areas. Of course, the extent of city boundaries may change with a potential annexation, which could have a large impact on the services able to be provided by Rural Transit (a topic for a different post).

Such a tax in Monroe County would require additional state legislation. Senator Mark Stoops has introduced several pieces of legislation (and has been for several years) that would give Monroe County the ability to (but not require it to) pass an income tax between 0.1% and 0.25% to fund transit expansion. Senator Stoops’ proposed bills for the 2017 session are:

  • Senate Bill 371, which is specific to Monroe County
  • Senate Bill 391, which applies to all counties except those that already have the authority under existing legislation

Neither of these bills would require a referendum/public question. Also, it appears so far that neither of these bills will receive a committee hearing this session.

This is where I am interested in hearing from Monroe County constituents. What do you think about a potential increase in income tax dedicated to public transit expansion? Please let me hear your thoughts.

Just for reference, here are our existing local income taxes:

  • Expenditure – Certified Shares (all-purpose local income tax, distributed county, cities and towns, townships, public library, fire protection districts, Bloomington Transit): 0.9482%
  • Expenditure – Public Safety (distributed to the county, Bloomington, Ellettsville, and Stinesville): 0.2500%
  • Property Tax Relief (replaces property tax): 0.0518%
  • Special Purpose (Juvenile services): 0.095%
  • Total Income Tax Rate: 1.345%

 

 

2017 Budget Order, Tax Rates, and Tax Levies Approved for Monroe County

Monroe County Courthouse at Night
Monroe County Courthouse at Night

Today Monroe County received its budget order for 2017 from the state, which includes:

  • The budgets for all taxing units (i.e., county, cities and towns, school districts, townships, public library, special units)
  • The property tax levies and tax rates for all taxing units
  • The property tax rates for each taxing district (i.e., the tax rates that actually affect each property owner)

Here is a chart showing the 2017 property tax rates by taxing district (along with the 2013-2016 rates for comparison):

screenshot-2017-02-12-19-48-06

As usual, the Ellettsville districts (the parts of Richland and Bean Blossom Townships within the incorporated boundary of the town of Ellettsville) have the highest tax rates in the County (the Bloomington City – Richland Township district is a very tiny, commercial-only area), with the Bloomington rates next in line.

However, in a departure from previous years, Washington Township no longer has the lowest property rates (that honor now belongs to Indian Creek Township). In fact, both Washington Township and Bloomington Township (the part of Bloomington Township outside of the City of Bloomington) had substantial tax rate increases in 2017 because of the newly established Northern Monroe Fire Territory.

The full budget order can be found here: monroe-county-2017-certified-budget-order

Indiana 2017 Local Income Tax Rates: Where Does Monroe County Stand?

Monroe County Courthouse at Night
Monroe County Courthouse at Night

The Indiana Department of Local Government Finance just released the final 2017 certified distributions and rates of local income taxes for Indiana counties. Local income taxes are what used to be called COIT, LOIT, CAGIT, CEDIT, etc., before a new law that went into effect in 2016 that simplifies local income taxation. All local income taxes are now simply referred to as Local Income Taxes (LIT). The full report from DLGF is available here: 2017_certification_calculations.

Under the new system, there are essentially 3 broad categories of local income tax rates: expenditure, property tax relief, and special purpose. Expenditure rates are there to raise funds for local government expenditures. Property tax relief rates use the money raised from income to offset property taxes. Note that this does not necessarily mean that taxpayers will see lower property taxes — these property tax relief rates are often used in communities where the constitutional circuit breakers (tax caps) have lowered property tax revenues. So the property tax relief rate would simply replace property tax revenue that had been lost through the tax caps; since the taxpayers in this case  would already be  at the circuit breaker, they wouldn’t necessarily actually see lower property taxes. Thus in reality the property tax relief rate may generate expenditure revenue as well. Finally, the special purpose rates are used for a variety of purposes, all of which require special legislation. Our local example is Monroe County’s Juvenile County Option Income Tax (JCOIT), a 0.0950% income tax that supports juvenile services, including the Binkley House Youth Shelter, juvenile probation, and the juvenile courts. Other examples include jail and juvenile facilities for a number of counties, library property tax replacement for Hancock County,  and courthouse renovation and maintenance and firefighting equipment in Randolph County.

Expenditure rates themselves are divided into 3 “buckets”: certified shares, public safety, and economic development. Certified shares are divided  up among all civil taxing units in a County (civil taxing units include the county, any municipalities, townships, fire protection districts, and public libraries), and the revenue can be used for any lawful purpose of the local unit government. Revenues from the public safety rates are distributed to the county and any municipalities in the county, and can only be used for public safety purposes (including police, jail, probation, fire, and EMT). Revenues from economic development rates are distributed to the county and any municipalities in the county, and can be used for a variety of economic development purposes, as well as any other expenses of the local unit of government.

Monroe County’s local income tax (LIT) rates are as follows for 2017:

  • Expenditure – Certified Shares: 0.9482%
  • Expenditure – Public Safety: 0.2500%
  • Expenditure – Economic Development: 0%
  • Property Tax Relief: 0.0518%
  • Special Purpose: 0.095%
  • Total Income Tax Rate: 1.345%

So how does Monroe County’s income tax rate of 1.345% stack up against other counties? I took the data from the DLGF and ranked counties by total income tax rate:

County Name Total 2017 LIT Rate Rank
Pulaski 3.3800% 1
Wabash 2.9000% 2
Jasper 2.8640% 3
Morgan 2.7200% 4
Parke 2.6500% 5
Tipton2 2.6000% 6
Miami 2.5400% 7
Brown 2.5234% 8
Jennings 2.5000% 9
Cass 2.5000% 9
Jay 2.4500% 11
Fayette 2.3700% 12
Randolph 2.2500% 13
Clay 2.2500% 13
Grant 2.2500% 13
Warren 2.1200% 16
Rush 2.1000% 17
Wells 2.1000% 17
Jackson 2.1000% 17
Montgomery 2.1000% 17
Elkhart 2.0000% 21
Clark 2.0000% 21
Clinton 2.0000% 21
DeKalb 2.0000% 21
Washington 2.0000% 21
Fulton 1.9300% 26
Perry 1.8100% 27
Benton 1.7900% 28
Steuben 1.7900% 28
Marion 1.7700% 30
Union 1.7500% 31
Daviess 1.7500% 31
Huntington 1.7500% 31
Noble 1.7500% 31
Putnam 1.7500% 31
Lawrence 1.7500% 31
Madison 1.7500% 31
St. Joseph 1.7500% 31
Starke 1.7100% 39
Carroll 1.7039% 40
Hancock 1.7000% 41
Howard 1.6500% 42
Adams 1.6240% 43
Fountain 1.5500% 44
Blackford 1.5000% 45
Franklin 1.5000% 45
Shelby 1.5000% 45
Wayne 1.5000% 45
Boone 1.5000% 45
Hendricks 1.5000% 45
Delaware 1.5000% 45
Henry 1.5000% 45
Martin 1.5000% 45
Lake 1.5000% 45
Whitley 1.4829% 55
Scott 1.4100% 56
LaGrange 1.4000% 57
Ripley 1.3800% 58
Allen 1.3500% 59
Monroe 1.3450% 60
Decatur 1.3300% 61
White 1.3200% 62
Owen 1.3000% 63
Bartholomew 1.2500% 64
Greene 1.2500% 64
Marshall 1.2500% 64
Ohio 1.2500% 64
Orange 1.2500% 64
Vigo 1.2500% 64
Floyd 1.1500% 70
Tippecanoe 1.1000% 71
Crawford 1.0000% 72
Dubois 1.0000% 72
Hamilton 1.0000% 72
Harrison 1.0000% 72
Johnson 1.0000% 72
Knox 1.0000% 72
Kosciusko 1.0000% 72
Newton 1.0000% 72
Switzerland 1.0000% 72
Posey 1.0000% 72
Vanderburgh 1.0000% 72
LaPorte 0.9500% 83
Spencer 0.8000% 84
Pike 0.7500% 85
Gibson 0.7000% 86
Dearborn 0.6000% 87
Porter 0.5000% 88
Warrick 0.5000% 88
Jefferson 0.3500% 90
Sullivan 0.3000% 91
Vermillion 0.2000% 92

As this table shows, Monroe County ranks 60th in overall income tax rates in Indiana, out of 92 counties. This puts us essentially at the top of the bottom third of Indiana counties in terms of overall income tax rate.

One concern with this ranking methodology that has been raised is that some of these local income taxes have been passed for property tax relief, and since these taxes offset property taxes, the property tax relief taxes really shouldn’t “count” against a county in its overall income tax rate for the purposes of comparison. I don’t necessarily agree with this logic, since, as I mentioned above, property tax relief rates don’t necessarily actually give the taxpayers any “relief”, and are instead just used to offset losses to local government from the tax caps. But nonetheless, in the following table I eliminated the property tax relief rates from the calculation, and re-ranked counties.

County Name Revenue Total Revenue Rank
Tipton 2.4000% 1
Jennings 2.2500% 2
Pulaski 2.2000% 3
Parke 2.1500% 4
Brown 2.0234% 5
Jasper 2.0140% 6
Rush 2.0100% 7
Wabash 1.9000% 8
Jay 1.8500% 9
Warren 1.8000% 10
Randolph 1.7500% 11
Elkhart 1.7500% 11
Union 1.7500% 11
Perry 1.7254% 14
Marion 1.7193% 15
Morgan 1.7180% 16
Wells 1.7000% 17
Starke 1.6500% 18
Jackson 1.6000% 19
Carroll 1.5039% 20
Cass 1.5000% 21
Clay 1.5000% 21
Clark 1.5000% 21
Clinton 1.5000% 21
DeKalb 1.5000% 21
Washington 1.5000% 21
Benton 1.5000% 21
Steuben 1.5000% 21
Daviess 1.5000% 21
Huntington 1.5000% 21
Noble 1.5000% 21
Putnam 1.5000% 21
Blackford 1.5000% 21
Franklin 1.5000% 21
Shelby 1.5000% 21
Wayne 1.5000% 21
Boone 1.5000% 37
Miami 1.4796% 38
Fulton 1.4500% 39
Hancock 1.4500% 39
Fountain 1.4500% 39
Whitley 1.4500% 39
Hendricks 1.3500% 43
Owen 1.3000% 44
Monroe 1.2932% 45
Fayette 1.2500% 46
Grant 1.2500% 46
Lawrence 1.2500% 46
Madison 1.2500% 46
Adams 1.2500% 46
Delaware 1.2500% 46
Henry 1.2500% 46
Martin 1.2500% 46
Scott 1.2500% 46
LaGrange 1.2500% 46
Ripley 1.2500% 46
Decatur 1.2500% 46
White 1.2500% 46
Bartholomew 1.2500% 46
Greene 1.2500% 46
Marshall 1.2500% 46
Ohio 1.2500% 46
Orange 1.2500% 46
Vigo 1.2500% 46
Howard 1.1500% 65
St. Joseph 1.1496% 66
Floyd 1.0500% 67
Montgomery 1.0000% 68
Crawford 1.0000% 68
Dubois 1.0000% 68
Hamilton 1.0000% 68
Harrison 1.0000% 68
Johnson 1.0000% 68
Knox 1.0000% 68
Kosciusko 1.0000% 68
Newton 1.0000% 68
Switzerland 1.0000% 68
Allen 0.9821% 78
Tippecanoe 0.9589% 79
LaPorte 0.9500% 80
Posey 0.9440% 81
Vanderburgh 0.9035% 82
Spencer 0.7611% 83
Pike 0.7500% 84
Gibson 0.7000% 85
Dearborn 0.6000% 86
Lake 0.5000% 87
Porter 0.5000% 87
Warrick 0.5000% 87
Jefferson 0.3500% 90
Sullivan 0.3000% 91
Vermillion 0.2000% 92

From this ranking, excluding property tax relief income tax rates, Monroe County comes out at 45, right in the middle of Indiana counties. So depending on how you look at it, Monroe County is right in the middle or atop the bottom third of Indiana counties in terms of income taxes.

There  is a lot more to explore with this data. Next I will focus more specifically on our neighbor counties.

 

 

Proposed Monroe County Budget, Tax Rates, and Levies for 2017

2016 County Council MembersEarlier today I posted that Monroe County budget adoption begins tonight at 5:30PM, but wasn’t able to post the proposed budgets, tax rates, and levies because of some glitches in the numbers. Now the final numbers are available that the Council will be considering tonight.

The first table shows the proposed budgets, property tax levies, and property tax rates (per $100 of net assessed value) for so-called controlled funds (funds that are reviewed by the Indiana Department of Local Government Finance — DLGF).

Note that while the adopted budget and tax levies will be accurate, the tax rates to be adopted will be higher than the actual tax rates ultimately imposed. This is because the adopted tax rates use a conservative estimate of the total net assessed value (85% of last year’s value). So the actual tax rates will be lower than the rates to be adopted.

2017 Proposed Budgets, Tax Levies, and Tax Rates for Controlled Funds
2017 Proposed Budgets, Tax Levies, and Tax Rates for Controlled Funds

In addition to these controlled funds, the Council will adopt the budgets for a number of funds that are so-called home rule funds, in which the DLGF does not review the budget.

2017 Monroe County Home Rule Funds
2017 Monroe County Home Rule Funds

Revenue for these home-rule funds come from a variety of sources. The Juvenile Facility COIT and Public Safety LOIT funds both receive revenue from income taxes. Many others receive income from fees for service (Stormwater, Convention Center Revenue), fines and fees (Diversion User Fees, Court Alcohol/Drug Svcs Fees), and innkeeper’s tax (Convention Center Debt).

The council will hold a first reading on the above budgets, rates, and levies tonight at 5:30 PM in the Nat U Hill Room, and will hold the second reading and final vote tomorrow (Wednesday) at 5:30 PM, in the same location. Hope to see you there!

Public Hearing for Public Safety Income Tax

2016 County Council MembersThe Monroe County Council will be holding a public hearing at our work session this Tuesday to consider an additional county-wide income tax rate of 0.25% to fund public safety expenses (the “public safety local option income tax” or PS-LOIT). The public hearing will be held on Tuesday, 2016-05-23 at 5:30 PM at the Nat U Hill room in the Monroe County Courthouse.

There is a lot to this issue, and I’ll try to cover all of the salient points as briefly as possible. I’m sure I will forget something important, however!

What is the Public Safety LOIT?

Currently, our local option income tax rate is 1.095%, made up of a 1% County Option Income Tax (COIT), which is shared among the county, the cities and towns, the townships, the public library, Bloomington Transit, and Perry-Clear Creek Fire Protection District. The remaining 0.095% is a Juvenile County Option Income Tax (J-COIT), which is earmarked for county juvenile services, including the Binkley House Youth Shelter, the Juvenile Court, and Juvenile Probation. The revenue generated by the new public safety LOIT would be shared between the County, the City of Bloomington, and the Towns of Ellettsville and Stinesville. In addition, the fire departments that serve the townships are able to request a share of the funding — more about this later.

What Would the Money be Used For?

Screenshot 2016-05-21 21.41.05The revenue is statutorily earmarked for public safety, which includes pretty much what you would think it does: police/law enforcement, fire protection, emergency ambulance, emergency medical services, emergency action, probation, community corrections, juvenile detention, jail, 911 communications systems, medical and health expenses for inmates, and police and fire pensions. More specifics on what expenses are permitted can be found in the enabling statute: Public Safety Tax IN CODE.

The discussion about the public safety LOIT here in Monroe County was initially sparked by discussions about putting the county’s unified 911 dispatch center on firmer footing. The operations of the dispatch center is funded through a mixture of the E-911 tax on phone service (currently $1/month for wireless and landline phone service and $1/transaction for prepaid wireless) and Monroe County and City of Bloomington general fund revenues. In 2015, Monroe County spent $291K out of its general funds for the dispatch center, and the City of Bloomington spent $1.14M. Only $574K came from E-911 taxes — an amount that is likely to either remain flat or decline. Neither the Town of Ellettsville nor any of the township fire departments currently pay directly for the operations of the dispatch center.

The enabling statute for the public safety LOIT specifically allows a percentage of the revenue to be earmarked “off the top” (i.e., before the rest is given to Monroe County, the City of Bloomington, and the Towns of Ellettsville and Stinesville. The current proposal is for 30% of the revenue to be earmarked for the operations of the dispatch center.

IMG_4350
Monroe County 911 Dispatch Center

However, while the needs of the dispatch center sparked the initial discussion,  all of the public safety providers in the county have substantial long and short-term unmet demands that this additional revenue could help address. The City of Bloomington administration has said that replacing aging vehicles and capital equipment (fire and police) would be their top priority for the funding.

While we as a County Council have not yet discussed our priorities as a body, previous discussions have identified both additional police officers and a community corrections center/work release center as very high priorities. The need for additional community corrections capacity in particular is necessitated by recent changes in the state law that push the responsibility for lower-level felons to counties. This is an important topic that deserves its own detailed discussion. And our sheriff’s deputies are spread far too thin out in the county. Adding additional deputies is a particularly high and urgent priority for me.

In a state that makes it nearly impossible for local governments to raise revenues to meet the demands and costs of service, this LOIT may represent our only opportunity for our community to raise revenue for critical public safety needs.

 

How Much Revenue Would the Public Safety LOIT Raise?

The statute allows for an income rate of up to 0.25% to be adopted. The current proposal is to adopt the maximum of 0.25%, and earmark 30% for the dispatch center. Using 2016 county option income tax receipts to estimate. the LOIT would bring in approximately $6.96M annually. Of course, as this is an income tax, the actual receipts depend on the income earned by Monroe County residents, and thus could go up or down.

If the proposal for 30% for dispatch is adopted, the dispatch center would receive approximately $2.1M annually. Combined with the E-911 tax on phones, this would fully fund the dispatch center, eliminating the need for the county and city to subsidize the dispatch center out of their respective general funds. The ordinance that would impose this tax makes it easy to change the 30% number, depending on the actual budget requirements of the dispatch center. This topic may see some debate during the Council’s public hearing.

After the $2.1M for dispatch is deducted, approximately $4.87M would be available for distribution to the county and the three cities and towns. Although the public safety tax is an income tax, revenue is distributed according to a formula based on the relative property tax footprints of each unit. My estimates are as follows:

Screenshot 2016-05-21 22.53.59

So the county would receive approximately additional revenue $2.3M for public safety expenses, as well as the approximately $300K that it currently spends on the dispatch center that it would no longer need to spend.

Who Passes the Public Safety LOIT?

Here it gets a little weird. The body that is empowered to pass the public safety LOIT (as well as other local option income taxes specifically for counties that have adopted the County Option Income Tax (COIT) is a little-known institution called the County Income Tax Council.

The County Income Tax Council is not a regular deliberative body with individual members. Instead, it is  a “virtual council” that rarely, if ever meets. It is defined by statute as follows:

Every county income tax council has a total of one hundred (100) votes. Every member of the county income tax council is allocated a percentage of the total one hundred (100) votes that may be cast. The percentage that a city or town is allocated for a year equals the same percentage that the population of the city or town bears to the population of the county. The percentage that the county is allocated for a year equals the same percentage that the population of all areas in the county not located in a city or town bears to the population of the county. On or before January 1 of each year, the county auditor shall certify to each member of the county income tax council the number of votes, rounded to the nearest one hundredth (0.01), it has for that year. (IC 6-3.5-6-3)

In other words, this council is made up not of individuals, but of fiscal bodies of other units of government.

In Monroe County, the county income tax council is thereby made up of the fiscal bodies of the county (the Monroe County Council) and the fiscal bodies of each of the municipalities in the county — the Bloomington City Council, the Ellettsville Town Council, and the Stinesville Town Council.  As described above, the votes are allocated amongst these bodies in proportion to their populations (and the county is given the population only of the unincorporated areas). For 2016, this means that each body gets the following “votes” on the income tax council:

  • Monroe County Council: 36 votes
  • Bloomington City Council: 59 votes
  • Ellettsville Town Council: 5 votes
  • Stinesville Town Council: 0 votes

Poor Stinesville winds up rounding down to 0!

All votes are cast by the body as a whole — in other words, all of the Bloomington City Council votes as a single bloc, Monroe County Council as a single bloc, etc.

What is notable about this is that the Bloomington City Council has a simple majority of votes on the income tax council — therefore, it has the power to pass, or deny, taxes that apply to the entire county. The rest of the votes of the bodies on the income tax council, including those of the County Council, are essentially symbolic. I have criticized this arrangement in the past as coming close to taxation without representation: The Phantom Council and Personal Property Taxes.

But What About the Fire Departments?

As I mentioned before, any public safety LOIT revenues not earmarked for the dispatch center get divided up among the County and the three cities and towns. However, while fire protection within the city or town limits is the responsibility of the respective cities and towns, and thus the city or town can simply spend some or all of its share of the revenues on their fire departments, fire protection outside of the city/town limits is NOT funded by county government.

Screenshot 2016-05-21 21.44.44Instead, fire protection is funded by property taxes (and some share of income taxes) at the township level, unless the townships have  combined their fire protection responsibilities into a fire protection district or fire territory. Monroe County has one fire protection district (Perry-Clear Creek Fire Protection District, which includes Perry Township and Clear Creek Township) and is in the process of creating a fire territory (Northern Monroe Fire Territory, which includes Bloomington Township and Washington Township). However, the Northern Monroe Fire Territory will not be established in time for the purposes of the public safety LOIT this year.

Indian Creek, Bean Blossom, Benton, Van Buren, and Bloomington Township all have fire departments. The City of Bloomington Fire Department by contract provides fire protection to Salt Creek and Polk Townships. The Ellettsville Fire Department provides fire protection to Richland Township.

So why does this all matter? The public safety LOIT statute allows fire departments providing service to political subdivisions not already entitled to a distribution of public safety LOIT revenues (i.e., the fire departments serving the townships) to request funding from the income tax council on an annual basis for the subsequent year.

In practice, this means requesting funding from the Bloomington City Council, since they have the majority of votes on the income tax council. So the township fire departments are requesting funding from the Bloomington City Council, and the Bloomington City Council does not represent a single resident served by these township fire departments. Yet another problem with the whole concept of the income tax council! Incidentally, there was a bill in the recently-concluded session of the general assembly that would have entitled the townships to a distribution from the public safety LOIT as well as the cities and towns — however, it didn’t pass.

In any case, by statute, the fire departments must make their requests for funding to the income tax council before July 1 for the subsequent year. The decision by the income tax council must be made before September 1. Therefore, the tax itself would need to be established before July 1, in order for the fire departments to have any revenue in place for the 2017 budget.

So How Much Is This Going To Cost You?

Currently the Monroe County local option income tax rate is 1.095%. To see how this compares to other counties, see 2016 Local Income Tax Rates — How Does Monroe County Compare? If this public safety LOIT passes, our rate will be 1.345%. It would cost a taxpayer with an adjusted gross income of $50,000 an additional $125/year.

Public Hearing

The statute that allows this public safety LOIT can be found here: Public Safety Tax IN CODE. Here is the County Council packet that includes the resolution that will be considered, that casts the County’s votes on the income tax council in favor of establishing the public safety LOIT: Council_Work_Session_Packet_20160524. The packet also includes a resolution that the County Council will consider that clarifies some procedures regarding any requests by fire departments for funding for service in the townships.

As far as the process goes: the Town of Ellettsville will be taking their final vote on a resolution casting its votes on the income tax council in favor of the public safety LOIT proposal tomorrow evening, Monday, May 23rd. The Monroe County Council will be holding our public hearing Tuesday, May 24th on our resolution for the LOIT. And the Bloomington City Council is scheduled to vote on its resolution (the one that matters!) on June 1st.

 

Hope to see members of the public at the public hearing on Tuesday. And if you have any comments or questions, please feel free to send them to me. I hope I’ve explained the gist of the proposal here — but I’m sure there will be additional questions.

2016 Local Income Tax Rates — How Does Monroe County Compare?

WestsideBack in 2014, when Monroe County was considering a small increase in the Juvenile County Option Income Tax, I ran a comparison of Monroe County with the other 91 counties on overall income tax rates (Income Tax Rates in Indiana Counties — How Does Monroe County Compare?). Now that we are starting to hear some calls from public safety agencies for a public safety local option income tax (which would be passed by the Bloomington City Council, not the County Council, incidentally), I thought I’d re-run the comparisons using 2016 local option income tax rates.

Here is a table showing the total combined local option income tax rates for 2016 for each county in Indiana, along with each county’s percentile.

Screenshot 2016-03-17 07.26.43
2016 Local Option Income Tax Rates by County

Monroe is at the 24th percentile rank, which basically means that Monroe County’s income tax rates are in (near the top of) the bottom quarter. Put differently, 76% of Indiana counties have a higher income tax rate than Monroe County.

So how do we compare to our neighbor counties?

Screenshot 2016-03-17 07.31.47
2016 LOIT Rates for Monroe County Neighbors

Monroe County currently has the lowest income tax rates of any of its neighbor counties.

Finally, how does Monroe County compare with its “peer” counties?

Screenshot 2016-03-17 07.35.43
2016 LOIT Rates for Monroe County Peer Counties

Obviously the definition of “peer” county is somewhat subjective, but these counties are ones that Monroe County is typically compared against, in terms of population, urbanization, demographics, etc.  In this comparison, we have the second-lowest income tax rates, second only to Vanderburgh County.

Data Source: Indiana Handbook of Taxes, Revenues, and Appropriations, Fiscal Year 2015

Study of Indiana Transportation Infrastructure Funding Mechanisms

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Indiana House Enrolled Act 1104 of 2014 required the Indiana Department of Transportation to commission a third-party study of transportation infrastructure funding mechanisms. The study was required to include charges based on at least the following:

  • Vehicle gross weight and miles traveled
  • Usage and degree of damage caused to transportation infrastructure
  • Flat per vehicle fees
  • Adjustments to sales tax on motor fuel, gas tax, special fuel tax (i.e., diesel), and the motor carrier fuel tax and surcharge
  • Tolling

INDOT commissioned Cambridge Systematics, D’Artagnan Consulting, and Indiana University to perform the study. The results were surprisingly hard to find on the INDOT Web site. You can find the study here: INDOT Road Funding Study Cambridge Systematics.

As you might imagine, there is no really good answer. Some alternatives, like an increased general sales tax (either an actual rate increase or dedicated revenue stream from the existing sales tax) produce enough revenue but harm the business climate and would be politically unpopular (especially if diverting the revenue from the existing sales tax resulted in a reduction to other important priorities like education or health care). Periodic increases and/or indexing to inflation of the gas, diesel, and surtaxes are easy to put in place but provide unstable revenue streams and are very politically unpopular. Others, like an increased rental car excise tax are easy to put into place and popular, but do not produce nearly enough revenue to make a difference. Road user fees, which are currently being piloted in Oregon (Oregon Road Usage Charge Program) and California (California Road Charge Pilot Program), are very difficult to enforce/collect, and are not yet politically popular. Etc. The study considers 17 different funding mechanisms (starting on page 16).

Probably the most seemingly obvious, but also most important, points that the study makes is that determining a road funding system is really a two-step process: first, the state needs to determine what Indiana wants to buy, and then select the funding mechanism to raise the necessary revenue. The first part involves some major policy decisions: do we just maintain the roads we already have, or do we build new roads as well?  If the latter, which roads, and how are they prioritized? For maintenance, at what condition do we want to maintain our roads and bridges? (Of course everyone will say that they should be maintained in top condition, until they are required to pay for that maintenance). And of course the issue that is most important to me — how do local roads and bridges fit into the funding mix?

The report also had a page on the public’s perception of transportation funding, which was probably the most fascinating of the whole study. The takeaways on this aspect included the following:

  • The Hoosier public both believes that road quality is poor and demands improved and new roads
  • The Hoosier public significantly overestimates the amount they pay in fuel taxes
  • For revenue mechanisms, the public preferences fees that shift the tax burden to “others” (any surprise there?)
  • General sales tax and road user charges are the most polarizing

This issue will be one of the bigger challenges ahead, both for Indiana and the nation.

 

Monroe County Council Adopts 2016 Budget

2015 Monroe County Council
2015 Monroe County Council

Last night the Monroe County Council unanimously adopted a $63.1M budget along with the property tax rates and levies for Monroe County Government for 2016. In part, this budget will be funded by $25.8M in property tax levies and a property tax rate of $0.4723 for every $100 of assessed value.

The budget is divided into a number of different funds. Some of these funds by law are reviewed by the State Department of Local Government Finance (DLGF), and others are considered “home rule funds”. This distinction is more historical than substantive, however; many of the home rule funds are very tightly restricted by law. After review by the DLGF, it is likely that the property tax levy and property tax rates will be reduced, as the rates and levies are always calculated using a smaller assessed value than the actual assessed value as a margin for error. In addition, the request for the General Fund includes an appeal for an “excess levy” — a property tax levy outside of the normal limits to correct several past errors and major property tax appeals — that will not necessarily be granted.

The following DLGF-reviewed budgets, tax levies, and tax rates were adopted for 2016:

2016 Monroe County DLGF-Reviewed Funds
2016 Monroe County DLGF-Reviewed Funds

Here are a few notes about several of these funds:

  • Debt Payment fund is for the mortgage on the Showers building. This debt will be paid off in 2017
  • Bond #2 is a one-year general obligation bond for county capital needs, including major building repairs, security upgrades, and vehicles. This bond will be paid off in 2016
  • Convention and Visitors Bureau is funded by the innkeepers tax
  • Highway and Local Road and Street funds are funded by gas tax and vehicle excise taxes
  • The Cumulative Bridge budget of $460,246 looks lower than it really is because the bridge budget and specific projects are always presented mid-year and funded through additional appropriations

The following budgets for home-ruled funds were also adopted. These funds do not have property tax rates and levies associated with them:

Monroe County 2016 Budgets for Home-Ruled
Monroe County 2016 Budgets for Home-Ruled

Just a couple of notes about these home-ruled funds:

  • The Juvenile Facility COIT fund is supported by the 0.95% Juvenile County Option Income Tax (JCOIT)
  • The COIT County Distributive Shares fund is supported by the County’s share of the 1% County Option Income Tax (COIT), and includes several major county departments, including the Sheriff, Courts, Probation, Treasurer, Auditor, Surveyor, Weights and Measures, and the Election Board. The Council intends to move the Election Board expenses out of the COIT fund and into a separate Elections fund early in 2016.
  • The Westside Economic Development, 46 Corridor Economic Development, and Fullerton Pike Economic Development funds are the 3 Monroe County Tax Increment Finance (TIF) districts

The next step is for the DLGF to review the budgets, tax rates, and tax levies. The County will receive what is called a 1782 statement, which represents the results of the DLGF review. The DLGF review is based on the financial statements submitted along with the statutes related to budgets, rates, and levies; it isn’t making a policy decision on the specific expenditures. The County has 10 days to review and respond to the 1782 statement, after which the results are final. The County will then receive a final budget order from the DLGF.

This was also the last meeting for County Councilor Rick Dietz, who resigned in order to move out of his district (District IV) with his new wife. We all wish Rick well!