- Associated Press - Saturday, December 12, 2015

INDIANAPOLIS (AP) - A study of Indiana’s statewide property tax caps shows that older, industrial cities have seen the biggest declines in revenue, while growing suburban communities are faring better.

Reports released by the nonpartisan Indiana Fiscal Policy Institute found that the caps implemented in 2009 have saved taxpayers money but that some of the state’s largest cities have taken financial hits.

Researchers found the caps cut Muncie’s property tax revenue by 45 percent and Anderson’s by 35 percent. The growing Indianapolis suburbs of Carmel and Fishers saw declines of less than 5 percent.

The caps will mean continued financial challenges for urban communities that aren’t growing, said study author John Stafford, retired director of the Community Research Institute at Indiana University-Purdue University Fort Wayne.

“The tax caps are here to stay,” Stafford said. “It means for urban areas a greater and greater reliance on income taxes. You’re going to see local units continue to try to diversify their revenue streams and they’re going to look to the General Assembly, where it’s necessary, for more local authority in being able to make those decisions.”

The caps, which took effect in 2009 and were later added to the state constitution, limit property taxes to 1 percent of a home’s assessed value. Rental properties are capped at 2 percent and businesses at 3 percent.

One study looked at 18 of Indiana’s biggest communities, finding that they saw an overall 21 percent reduction in their property tax levies. Indianapolis was not included in the study because of the complexities of its consolidated city-county government.

Terre Haute lost nearly 32 percent of its property tax levy to caps. Its core revenue - consisting of property taxes plus income tax revenue - is now 78 percent of what it was in 2008

Terre Haute Mayor Duke Bennett has resisted raising income taxes or user fees to make up for some of the lost revenue, but is now supporting a new fee to help cover the city’s trash-collection costs.

“To me, it’s the cleanest, easiest way to show the people paying it where the money is going,” he said.

John Ketzenberger, president of the Indiana Fiscal Policy Institute, said the decline of the state’s automotive industry, lingering effects of the recession and the tax caps have been a bad mix for several cities.

“They were once considered decent with a good property tax base,” he said. “The hollowing out of the industrial sector has impacted cities like Anderson.”


Indiana Fiscal Policy Institute report: https://indianafiscal.org/resources/IFPI%20Fiscal%20Health%20of%20Cities%20FINAL.pdf

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