News From Terre Haute, Indiana

February 11, 2014

Mayors push back on Pence tax plan

50 Indiana mayors denounce elimination

Maureen Hayden
CNHI

INDIANAPOLIS — Mayors from across the state —including Terre Haute Mayor Duke Bennett — are in open revolt against Gov. Mike Pence’s plan to cut a tax on business equipment, challenging his promises to protect their communities from the plan’s effects.

On Tuesday, about 50 mayors from big cities and small towns crowded into a press conference to denounce the plan that would eliminate $1 billion in revenue collected by local governments, schools and libraries.

The mayors — Republicans and Democrats — called for the Legislature to kill two Pence-supported bills that would begin to wind down the tax, unless the state comes up with revenue to offset the cuts.

“I’ve never seen mayors so united in trying to defend our communities,” said Angola Mayor Richard Hickman, president of the Indiana Association of Cities and Towns, known as IACT.

The pressure may be working.

Hours after the press conference, Pence met with a handful of mayors and told them he’s “open” to the idea of the state replacing revenues lost under the Senate’s version of his plan. The Senate bill would exempt smaller companies from paying the business equipment tax.

“This would ensure that any reform of this tax does not unduly burden local governments or shift the cost of this tax onto hardworking Hoosiers,” Pence said.  

That brought a conciliatory response from some of the mayors in the meeting. Kokomo Mayor Greg Goodnight, a Democrat, called Pence’s gesture progress. “However, he didn’t indicate a replacement for those funds, so this still has to go through the legislative process,” Goodnight said.

Local leaders remain wary. Pence offered the mayors no details on a source of the replacement money. Nor would his pledge cover the House version of the bill, which proposes giving counties the authority to kill the business equipment tax.

And there’s no promise from legislative leaders that they’ll go along with the idea. To date, the Legislature’s fiscal leaders have vowed not to reopen the budget process, which is needed to find state replacement revenues.

“It’s not a major breakthrough. [Pence is] not able to promise anything,” said Matt Greller, director of IACT, who joined the mayors’ meeting with the governor. “But it’s the first step we’ve had in the right direction.

Less than a week ago, Pence sent a letter to mayors seeking support for what he’s called his top legislative priority — repealing the tax that businesses pay on equipment in order to attract development to the state. He’s courted mayors from the state’s biggest cities, meeting with them personally last week.

The pushback was almost immediate, with some of the toughest criticism of the Republican governor’s plan coming from Republican mayors who see the tax cut as a revenue-killer for critical services.

“We’ve been incredibly frustrated,” said Bennett, Terre Haute’s Republican mayor. “We know what will happen if this goes through.”

Bennett said most cities “are already at their breaking point.”

Indianapolis Mayor Greg Ballard, also a Republican, had been seen as a possible ally of the Pence plan because he supported the property tax caps of 2008, which went a long way toward limiting local revenue streams. Ballard disabused anyone of that notion Tuesday.

"I have been a vocal advocate for finding efficiencies and creative cost-cutting measures in local government," said Ballard. "However, current proposals to eliminate even a portion of the business personal property tax do not take into account the impact additional revenue cuts will have on public safety, schools and the many other vital services local governments provide.”

Indianapolis stands to lose $40 million a year if the tax is repealed in full.

For months, Pence has promised that whatever plan comes out of the Legislature won’t “unduly burden” local governments or harm homeowners, who could end up paying more property taxes if the business equipment tax is repealed or lowered.

But Pence hadn’t, until Tuesday, offered any details on how he’d mitigate the harm. Last week, he told reporters that he didn’t support the idea of the state replacing the lost revenues.

Mayors said Tuesday they’re angry at being kept in the dark about revenue replacements.

“We’re a month and half into the session, and no one has said a word about it,” Ballard said.

Democratic mayors were just as tough in their criticism as Republicans.

Goodnight said the House version of Pence’s plan — which gives counties authority to permanently roll back the business tax — could pit communities against each other. That undermines the advice of economic development experts who urge cooperation, he said.

Goodnight said he’s asked which respected economist supports eliminating the business tax.

He said he’s still waiting for an answer.

Evansville Mayor Lloyd Winnecke, a Republican, said mayors view the House and Senate bills with deep suspicion, even though neither would completely repeal the tax.

“We get the [current] bills don’t call for total elimination,” he said. “But we also get that, based on prior experience, this will be first step in a total ban.”



Maureen Hayden covers the Statehouse for CNHI, the Tribune-Star’s parent company. She can be reached at maureen.hayden@indianamediagroup.com. Follow her on Twitter @MaureenHayden.