News From Terre Haute, Indiana

September 4, 2013

Sanitary district needs user fees to pay debt caused by tax caps

Arthur Foulkes
The Tribune-Star

TERRE HAUTE — To cover outstanding bond debt, the Terre Haute Sanitary District is dipping into the city’s sewer fee revenue, a city official said this week.

Chuck Ennis, a member of the Sanitary Board of Commissioners and city engineer, told the five-member board Tuesday that the state’s property tax caps have taken a toll on the sanitary district’s ability to cover its outstanding bond debt, a large part of its budget.

As a result, revenue raised through sewer fees is being used to help cover outstanding sanitary district bond payments, he said.

“The tax caps are absolutely killing us,” Ennis told the commissioners Tuesday morning in City Hall. The district’s property tax revenue has fallen “dramatically” since the caps took effect, he said.

For several years, the sanitary district received about $7.6 million in property tax revenue to cover its outstanding bond payments, Ennis said. However, due to the tax caps, that revenue has been shrinking.

In 2012, for example, the sanitary district’s approved budget called for approximately $7.7 million in property tax revenue. However, due to the tax caps, the actual amount received was roughly $6.3 million, according to city figures.

The difference was made up using wastewater treatment facility user fees, Ennis told the board.

In November of last year, the Terre Haute City Council voted to increase sewer rates to cover multi-million-dollar improvements to the wastewater treatment plant. H.J. Umbaugh & Associates, an Indianapolis-based accounting firm, calculated what sewer fees needed to be to cover the improvements and to cover lost property tax revenue for the sanitary district, said Leslie Ellis, city controller. However, the reduction in sanitary district property tax revenue has been greater than expected, she said.

“We didn’t know it would be that much of a hit,” Ellis said.

Still, Ellis added, “there is money available for these bond payments. All payments will be made.”

It is possible for a local government entity, such as a city, county, school corporation or special taxing district, to receive more revenue than is provided for under the tax caps to finance a project, stated Jenny Banks, director of communications for the Indiana Department of Local Government Finance, in an email Tuesday to the Tribune-Star.

However, before that can happen, voters must approve, in a referendum, the increased tax rate for the project, she stated. “A referendum for the [Terre Haute] sanitary district was not requested, therefore maintaining the tax rate for the sanitary district under the tax caps,” she stated.

Reporter Arthur Foulkes can be reached at 812-231-4232 or arthur.foulkes