Local leaders fearful about impact of proposed change to property tax cap exemptions in St. Joseph County

INDIANAPOLIS — A new bill making its way through the Indiana Statehouse could put more money in the pockets of homeowners across St. Joseph County. But, there's a catch: if the bill passes, it could mean millions more in lost revenue for local government. This bill would lift an "exemption" that was put on Indiana's new property tax caps, passed by the General Assembly in 2007. Under that bill, better known as House Enrolled Act 1001, property tax rates across the state were capped at 1 percent for homes, 2 percent on farms and rental units, and 3 percent on commercial properties. But, HEA 1001 also included an exemption for St. Joseph and Lake Counties specifying that bond debt used for things like school construction, jail construction and other municipal capital projects and borrowing would be exempt from the new cap levels. St. Joseph County's debt load, which includes debt for all taxing units and school corporations as well as the county government, is under the state-mandated limit of 2 percent of assessed property value, according to County Auditor Peter Mullen (D). For most homeowners in St. Joseph and Lake Counties, the exemption provision has kept the actual property tax cap levels above 1 percent--closer, on average, to about 1.2-1.3 percent--while the remainder of homeowners in the state saw their levels capped at the full 1 percent by 2010. Those exemptions are scheduled to end in 2019. But, now, that timeline could be moved up. Under a proposal introduced in the House last week, the exemptions would be tossed out. House lawmakers voted 95-0 last week to amend Senate Bill 250, which would strip the circuit breaker credit in St. Joseph and Lake Counties from the original property tax cap bill. Lifting the exemptions would put millions back in taxpayers' pockets, and some Tuesday said: it's about time. I think it's a good idea," said Mike Szymanski, of South Bend. "Anything to lower the taxes and give us a break. There are a lot of people having a tough time right now." But, some local leaders caution the additional money to taxpayers would come with a cost. "Anything we can do to lower the burden on our taxpayers, we're in favor of," said St. Joseph County Commissioner Andy Kostielney (R). "But, at what expense to being able to run government the way it needs to be run? That's the trade-off we're going to need to figure out." For Mullen, that trade-off isn't adding up. If the cap exemption is lifted here, property owners would stand to gain millions of dollars in tax breaks--about 0.2-0.3 percent for the average homeowner. But, all of that money would be taken away from local government, and the impact, Mullen says, would be severe. "It could be as high as $22 million for St. Joseph County," he said. "And that includes City of South Bend, City of Mishawaka, North Liberty, Lakeville, all the townships as well as all the school corporations." St. Joseph County's portion of lost revenue alone would be around $5 million, said St. Joseph County Commissioner Bob Kovach (D). Losing that funding on top of existing deficits projected to be in the millions of dollars again next year would mean only one thing, Kostielney said. "We'd have to start looking at reductions in services," he said. "We're at the point now where we've got personnel manipulations we can make to get [the existing] deficit down. But, with [another cut of $5 million], we're getting to the point where we'd have to start laying people off or cutting services, and probably both." "We've gone through that before," Mullen agreed. "In the last two years, our [County] Council has cut out $6.5 million from our general fund. That's more than 10 percent of our budget. If we have to do it again, we'll find a way. But, we'd have to sit down and go through every single budget all over again. It would be hard, and we'd have to make some tremendous sacrifices." It's one reason why some taxpayers WSBT spoke with said the gain in tax breaks wasn't a fair trade off for a loss in services. "Schools are already hurting right now. They're laying off teachers and special ed folks. So, this would impose an additional burden on schools," said Mark Timler of South Bend. Asked if he'd be willing to continue paying the taxes he had if it meant services would continue, Timler quickly replied. "Yes," he said. "Simple as that." "We've already gone through enough cuts," agreed Michele Kastner of South Bend. "I think it's time to stop the cutting and start putting back into our community. St. Joe County is in need of more funding, not less. So, I say, leave it where it is." "It's hard to fight a tax decrease for our taxpayers," said Mullen. "They've struggled. We've struggled. But, this would force us to make some tremendous sacrifices." But, those sacrifices may be on hold for the moment. Any relief for taxpayers in the two counties would probably be short-lived if SB 250 were to go forward as amended, House Speaker B. Patrick Bauer, (D-South Bend) told The South Bend Tribune. Indiana voters will have an opportunity to vote tax caps into the state constitution in November, and the referendum language the General Assembly approved last month includes the Lake and St. Joseph exemptions. The constitutional amendment, which is expected to win approval, would restore those exemptions, even if SB 250 passes, Bauer said. No action for a third reading on the bill has yet been scheduled. South Bend Tribune Statehouse Staff Writer Kevin Allen contributed to this report.