Porter County and city and town leaders plan to explore scenarios dealing with a new local income tax law that has all municipalities opting in and includes schools, libraries, fire service and townships in their funding.
Porter County held its first Municipal Unit Strategic Taskforce (MUST) meeting Wednesday afternoon. The 12-member taskforce is comprised of one representative from the County Council – Councilwoman Michelle Harris, R-At-Large – and the clerk-treasurers of every city and town in the county.
Senate Bill 1 requires the group to develop a non-binding report to the Indiana Department of Local Government Finance by Nov. 2 on the county’s plans for its future local income tax, or LIT, structure. It allows cities and towns with more than 3,500 residents to opt out of a county LIT and adopt their own rate of up to 1.20% for municipal services.
In Porter County, that means Hebron, Porter, Chesterton, Portage and Valparaiso have the option of doing so. Opting in or out requires a vote by the city or town council.
For all that opt in, as well as the cities and towns with less than 3,500 residents, the county adopts the rate. Porter County is famous for its .5% LIT, the lowest of the state’s 92 counties.
That rate has a current tax base of $7.6 billion, resulting in $38 million in county-wide tax revenue.
Porter County is also unique in that it must contribute $3.5 million annually to the Regional Development Authority off the top of that revenue, followed by $13.5 million in homestead credits, which are eliminated in the new LIT structure. The RDA obligation is preserved by the new LIT structure.
Municipalities are to adopt changes to LIT by Oct. 1, 2028, using 2020 census data. Changes take effect in 2029, and revenues come into play by 2030.
Amber Nielsen, senior manager with municipal advisor Baker Tilly, which is assisting Porter County, among others, said Porter County, unlike some rural counties, is in a good position.
“Porter County does have a pretty high tax base, which, in a lot of ways, will make the new structure work well in Porter County,” she said.
The county currently uses all its LIT in the economic development category. SB1 allows a maximum rate of 1.2% for county services; a fire/EMS rate of up to 0.4%; non-municipal units (such as airports and solid waste districts) up to 0.2% with a maximum of .05% per unit type; and a 1.2% maximum for municipal services adopted by either the county council or city/town council.
“It could cause some major differences in what Porter County residents pay,” Nielsen said of different municipalities adopting their own rates. “Right now everyone pays the same rate. You could have people living across the street paying different LIT rates.”
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Statute requires counties to convene a MUST by Oct. 1, and several already began meeting as early as June, according to Nielsen. The group asked her to run the numbers on all-inclusive scenarios that see all municipalities opting in at rates that allow them to include funding to make the non-municipal units of libraries and townships whole, as well as neutralizing the loss of the homestead credit for taxpayers.
Following Nielsen’s run-through of several potential scenarios, Harris proposed Nielsen run scenarios that have all municipalities adopting a 1% LIT to include funding of all the entities. “Like the whole family, the whole county. Woo hoo, we’re all here!” she said.
“I would also do .75%,” said Portage Clerk-Treasurer Elizabeth Modesto. “Or whatever makes everyone whole,” added Burns Harbor Town Council President Toni Biancardi, R-At-Large, who is filling in on the taskforce as the town is currently without a clerk-treasurer.
“What rate could we be at that’s not going to eat into the community?” Valparaiso Clerk-Treasurer Holly Taylor clarified.
“I do think absolutely we can get there,” Nielsen said. “Porter County has really strong AGIs (adjusted gross incomes).”
What the group didn’t do was weigh in on Nielsen’s informal polling of which municipalities had an idea of whether or not they would opt in. “Speaking for Portage, I think it depends on what the county adopts, too,” Modesto said.
Taylor asked Nielsen what other counties were doing and she replied, “The big one is the schools piece.” She said she expects a lot of the state’s 92 MUST reports to the DLGF to have school funding at the top of their concerns.
“Schools are completely excluded and they get $0. There is no bucket for them,” Nielsen confirmed when asked if schools would have to resort to referendums for funding.
“A lot of counties are not happy about that,” she said, adding that Porter County’s MUST report is its chance to relay its thoughts on the subject to legislators.
The group scheduled its next meeting for 3 p.m. Tuesday, Oct. 13, in the Porter County Commissioners Chambers. A third meeting, which may be cancelled if unnecessary, was also scheduled for 3 p.m. on Tuesday, Oct. 19.
Shelley Jones is a freelance reporter for the Post-Tribune.