News From Terre Haute, Indiana

December 21, 2013

Vigo Schools fears losing business property tax revenue stream

Sue Loughlin
The Tribune-Star

TERRE HAUTE — The Vigo County School Corp. could lose about $3 million in revenue to various funds if Indiana’s business personal property tax is eliminated by the Legislature, according to projections by the county auditor.

That has local school officials worried about the potential impact on property-tax supported funds used to maintain buildings, buy equipment and pay utilities; operate the bus transportation system and replace buses.

“We already have such a significant circuit breaker loss in this community,” said Donna Wilson, VCSC chief financial officer, referring to property tax caps enacted a few years ago. “We’re losing close to $4 million [annually] because of circuit breaker tax credits.”

The circuit breaker caps were aimed at helping Hoosiers by ensuring they do not pay more than a fixed percent of their property’s gross assessed value in property taxes.

But the loss of the business personal property tax revenue would impact those same funds: capital projects, transportation, bus replacement and debt service, although districts “have to make our debt service payments,” Wilson said. Those four funds are supported by local property taxpayers.

“There are only so many times you can go to those funds and keep reducing the revenue stream,” Wilson said.

The Indiana Association of School Business Officials, of which she is a member, believes the issue “really needs to be studied. We very much support economic growth … but we also believe there needs to be a replacement for that revenue loss,” she said.

In 2012, the state collected nearly $1 billion in personal property taxes, which all businesses must calculate based on the value of their equipment. The tax covers everything from office furniture to shelving to massive production machinery.

Vigo County collects about 26 percent of its property tax from business equipment.

Wilson is especially concerned about the transportation fund. “How do we absorb that loss to transportation without really impacting getting those kids to and from school safely. A lot of our kids rely on that bus transportation,” she said.

Statewide, district transportation funds have suffered in recent years because of increased fuel costs. “Over the years, fuel increases have exceeded the amount of levy growth in that fund,” Wilson said.

More and more districts are having to make difficult decisions related to bus transportation because those dollars just keep going down, she said. “We feel it’s really a very important part of our program that we have a transportation system, just from the safety and security standpoint,” Wilson said.

If the district lost that business property tax revenue, without replacement of the revenue, “We’d have to sit down and look at everything we are doing,” she said.

The loss of revenue could ultimately impact the general fund, as well, she said.

Legislation does allow some expenses for transportation to be paid out of the general fund, such as fuel costs, she said.

That’s not something the district wants to do because “then you start eroding your operating fund,” which can eventually impact the classroom, Wilson said. “We don’t want any classroom impact.”

She noted that last year, the district did not collect nearly $900,000 of its transportation levy due to a combination of property tax caps and delinquent taxes (taxes not paid).

The transportation department works hard to meet its budget through such measures as eliminating stops, shortening idling time and closely watching fuel expenditures, she said.

“We’ve been fortunate we’ve been able to make it work,” she said. Additional cuts will make it increasingly difficult.

With property tax caps, the hardest hit fund so far has been capital projects, the largest of the funds supported by local property tax dollars.

Whereas the district used to do about $2 million to $3 million in facility projects annually, “We don’t do those anymore,” she said.

But as debt service payments for facility projects have fallen off, the district has staggered in smaller projects with short-term general obligation bonds.

The district’s facilities and infrastructure are in good shape “because we had done so many of those renovation projects up to the point where we saw the impact of the circuit breaker,” she said.

Legislation passed several years ago allows school districts to pay a large portion of utility costs out of capital projects. The VCSC currently pays about $3.2 million for electric and natural gas bills out of capital projects.

If capital project dollars decreased too much and more money was needed for building maintenance or equipment, one option would be to move utilities back to the general fund, Wilson said. Again, that’s not something the district would want to do.

The district could look at deferring certain maintenance/repair projects, although, “there are consequences to that,” she said.

Dennis Costerison, executive director of the Indiana Association of School Business Officials, said that elimination of the business personal property tax would mean the loss of “a substantial amount of money” for schools.

Vigo County probably would be impacted more heavily than other districts because of its reliance on the business personal property tax.

 “At this point in time, many schools are on the edge here and loss of any more revenue will be very, very detrimental,” Costerison said. “Right now, we would oppose the concept because there is no remedy to deal with the loss of tax revenue.”

Many legislators are reacting very cautiously to the proposal and may not be ready to move forward  in 2014, he said. “I think we’ll probably see a study committee come out of the Legislature.”

Sue Loughlin can be reached at (812) 231-4235 or