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.

 

 

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.

911 Dispatch Funding in Monroe County

Although it hasn’t been reported on very widely, Monroe County Government and the City of Bloomington are currently collaborating in building a new Unified Dispatch Center for all of Monroe County’s public safety agencies on the second floor of the new Bloomingon Transit Hub. This new dispatch center will replace the antiquated joint dispatch center in the Bloomington Police Station. Besides the new building, a key upgrade will be a new Computer-Aided Dispatch/Records Management System that will greatly increase our ability to respond more quickly and accurately to 911 calls.

Last month, the County Council appropriated $1.8M out of the general fund for its share of the furnishing of the new dispatch center (the City and the County have yet to come up with a final agreement on what constitutes equitable distribution of the costs).  Debates will continue at the County in future months about how much our contribution should be, for what purposes, and how to fund the remaining costs of construction and furnishing.

Ongoing operations of the dispatch center (i.e. dispatch personnel, software maintenance, etc.) will also be funded from several sources, both City and County. The County also has access to a revenue stream that is dedicated to the funding of Public Safety Answering Points (PSAPs), of which the dispatch center is one. This revenue comes from the E911 fees paid by landline, wireless, and prepaid wireless telephone users, and currently generates around $689K annually. However, this doesn’t cover anywhere near the costs of actually operating the dispatch center, which currently employes 25+ dispatchers. Another important policy question to be resolved is whether the other public safety agencies that are dispatched (e.g. fire departments, hospital) should pay anything towards the operation, since the Unified Dispatch Center would be providing services to them.

At last week’s County Council Work Session, I gave a short presentation on (a) the history and current state of the 911 revenue stream and (b) the interlocal agreements between the city and county, in order to give councilors some context for future decision-making on dispatch center operations. Several people have asked me for a copy of my presentation, so I thought I would include it hear.  At some point when I have time I will add some additional explanatory text.

Slide04

Slide05

Slide06

Slide07

Slide08

Slide09

Slide10

Slide11