While a report has yet to be submitted to the state and that will be non-binding, the Porter County Municipal Unit Strategic Taskforce, or MUST, is coalescing around an approach to local income tax that keeps all municipalities on the same team, funds fire/EMS, libraries, and townships, and asks state lawmakers to make it possible for them to fund schools.
Tasked with trying to replace losses due to property tax credits granted by Senate Enrolled Act 1, the group met for its second meeting Tuesday afternoon and continued with the inclusive tone set at the first meeting Sept. 30. Amber Nielsen, senior manager with municipal advisor Baker Tilly, ran the MUST through seven theoretical scenarios of how the county might choose to manage its LIT, or local income tax.
SEA 1 requires the group to develop a non-binding report to the Indiana Department of Local Government Finance (DLGF) by Nov. 2 on the county’s plans for its future 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. The first LIT adoption carries for three years under current statute and would be adopted annually after that.
Tuesday, the MUST membership, made up of Porter County Councilwoman Michelle Harris, R-At-Large, representing the county council, and clerk-treasurers from every city and town in the county, were focused on Scenario 6.
“It’s actually lower than 1%, which is awesome,” Nielsen said of the resultant estimated LIT after allowing a 0.17% rate to fund schools.
Scenario 6 also calls for illustrative LIT rates of 0.23% for municipalities; 0.14% for the county; 0.02% for townships; 0.01% for libraries; 0.01% for the Porter County Airport Authority; and 0.08% for fire and EMS providers, for a total estimated LIT in 2030 of 0.6509%. Nielsen provided figures on how the various scenarios would affect taxpayers.
Under Scenario 6, a taxpayer with an adjusted gross income of $97,000 would see an annual tax liability of $631, or $53 per month, which is $146 more annually or $12 per month more than their contributions now under the 0.5% LIT.
Currently, SEA 1 does not allow for the inclusion of school funding in the LIT, but Nielsen said every county she is assisting to formulate a report is including that need to the state. In the meantime, “the schools, they’re probably going to have to utilize referendums,” she said.
Harris asked if school corporations could go before their respective city or town councils for money and Nielsen said, “I think that’s a legal question,” to which County Council Attorney Adam Mindel weighed in that he didn’t think school corporations would have that option.
Harris asked how many school corporations are currently operating under referendums, and Nielsen said she believes it is four districts, with three of them having referendums for operating expenses rather than capital projects.
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When Harris opened the floor for public comment, James Chowning, the newest member of the East Porter County School Corporation Board, which oversees Kouts, Morgan Township and Washington Township Schools, said, “Thank you, thank you, thank you for understanding the impact this has on the schools!
“The money that they think they saved in property taxes was essential,” he added after the meeting. “It wasn’t fat.”
Valparaiso Clerk-Treasurer Holly Taylor pointed out that while a household might be saving $300 per year in property taxes, each earner might be paying $166 more in income taxes, “so they’re not saving any money.”
“That’s a good point,” Nielsen added.
“That property tax savings is washing out,” Taylor concluded, before adding, “We are one of very few counties that don’t have a public safety tax.” She said if the county council chose to adopt one, it would be in addition to the figures already being debated. “Those are things I don’t think they’ve thought about.”
The MUST will disperse to their respective municipalities for feedback and reconvene one more time at 3:30 p.m. Monday, Oct. 19, in the Porter County Board of Commissioners Chambers before submitting its report.
Harris expressed gratitude for Porter County’s starting point of 0.5% LIT. “We are significantly lower starting than any other county,” she said. “Can you imagine being maxed out before it (a new LIT) even comes to fruition?”
“There are a lot of counties that don’t have the AGIs to make up for what is lost,” Nielsen agreed. She also warned them their work is not over by the November deadline. “The likelihood you’re all going to have to convene again next year is high,” she said.
Shelley Jones is a freelance reporter for the Post-Tribune.