TERRE HAUTE —
The other shoe has finally dropped.
Back in December, the first shoe fell when local officials said assessed property values in Vigo County had dropped by more than $300 million, about 7.5 percent. Since then, officials, including Mayor Duke Bennett, have been wondering what this would mean for their budgets.
Many have been expecting the worst.
And, it seems, something like the worst has happened, from the perspective of local government entities.
Local government taxing units get their budgets approved by the state, which sets a “levy,” meaning the amount of money the entity is approved to spend.
After the levy is determined, tax rates are set to ensure the entities get their approved amounts.
Because assessed values in Vigo County fell, tax rates needed to increase so that each taxing unit could reach its approved levy. In Harrison Township, for example, the property tax rate increased to $4.01 per $100 of assessed value from $3.73 cents last year.
Because of the higher rates, more properties in Vigo County have hit their caps, making it harder for the city and other taxing entities to raise all the money they hoped to spend.
According to budget figures released last week, the property tax caps will reduce property tax revenue for the City of Terre Haute by about $9 million this year.
“That’s more than we anticipated,” said Leslie Ellis, city controller. In recent years, the caps have cost the city between $6- and 7 million, she said.
Indiana’s property taxes are capped at 1 percent for residential property, 2 percent for residential rental property and 3 percent for commercial property.
By the numbers
Because of the tax caps, it seems certain the city is going to need to make significant cuts this year, Ellis said. So far in 2013, the city has managed to stay within its budget, which was approved by state officials in March, she said.
At the end of the first quarter of the year, the city had spent about 24 percent of the money approved for its critical general fund, Ellis said. The general fund is the city’s biggest single fund and is used to pay for salaries and many other day-to-day city expenses.
Indiana’s Department of Local Government Finance approved a general fund budget of $33.2 million for the city. That means the city has spent about $7.9 million of its approved general fund budget so far this year.
The other big line items in the city’s budget include police officer and firefighter pensions. Together, those total about $5 million in the 2013 budget.
The city’s street department — which handles everything from leaf pickup to pot hole repairs, is another big ticket item. That department’s budget is $3.8 million this year, of which about 17 percent — or $650,000 — has been spent so far this year.
The Terre Haute Parks and Recreation Department is another big item in the budget. The parks budget was approved about $2.6 million for 2013, of which about 18 percent — or $486,000 million — has been spent, according to figures provided by Ellis.
A final budget item with annual expenses of more than $1 million is the city’s transportation department, which provides bus service. That department’s approved budget was about $1.4 million for 2013 — significantly less than the city hoped to spend. About 20 percent of the transportation budget had been spent by the end of the first quarter, according to Ellis.
Apart from property taxes, the city receives revenue from a number of other sources. Those sources include the county’s wheel tax, the county’s economic development income tax, the regular county income tax and taxes on alcoholic beverages. In the first quarter, these other sources of revenue reached about $2.9 million, according to figures provided by the city.
On a semi-annual basis, the city also receives money from cigarette taxes, financial institution taxes, motor vehicle/aircraft excise taxes, commercial vehicle excise taxes and a liquor excise tax.
Property taxes are the biggest single source of revenue for the city, but the city receives its annual property tax revenue in just two big payments, one in July and one in December. As a result, managing the city’s budget is largely a timing and balancing act, attempting to make sure all sources of revenue are adequate to cover expenses at the time those expenses arise.
To help it meet day-to-day expenses between property tax payments, the City of Terre Haute has borrowed money in recent years. In 2012 the city borrowed $5 million using what city officials called a “tax anticipation warrant,” essentially a short-term loan to be repaid using future tax revenue. That loan was renewed again for this year.
It is Mayor Duke Bennett’s goal to eliminate the need for short-term loans in the next couple of years, he has said. Toward that end, he’s hoping to find extra revenue through a solid waste fee of about $9 per month for Terre Haute households, for example. But, even with such a fee, it seems likely that city finances will continue to be a big challenge for the mayor and the City Council for several years to come.
Reporter Arthur Foulkes can be reached at 812-231-4232 or firstname.lastname@example.org