The latest accounting error by the state will mean millions of dollars in unexpected revenue for Allen County, but some officials questioned why it took so long.
State officials on Thursday said a programming error cost local units of government $206 million in local option income tax revenues in 2011, including $10.1 million for all of Allen County. Information was not yet available about how that $10 million would be split between county government, Fort Wayne and other entities.
County Commissioner Therese Brown said it was good news that the error was in the county's favor, but she joked that maybe it would be wise to save the money in case the state finds another error showing the county owes more money.
"How many times has this happened in the past?" she said. "It's a little frustrating. It's rather unsettling to not feel comfortable in the revenue we should count on to back our budget."
Brown even suggested that it might be wise for counties to investigate handling their own income tax collections, although she said she was unsure how much such an effort would cost.
Mayor Tom Henry said cities and towns across the state have been stretched financially during the national recession, and errors like this only make it harder for everyone.
"It's time, though, for the state to get its financial house in order and get back on track," he said in a prepared statement.
It was the second major error discovered in the Department of Revenue in the past six months. In December, Gov. Mitch Daniels announced the state had found $320 million in misplaced corporate tax revenue.
Fort Wayne City Councilman Mitch Harper, R-4th, said he can't recall anything the size of these two errors in Indiana history, which cause difficulties when trying to put together a proper budget.
"You need to have stability in your income sources," he said.
Matt Greller, executive director of the Indiana Association of Cities and Towns, said he appreciated the state finding the error and acting quickly, but he said the situation does raise concerns for local governments.
"This failure has likely impacted not only the basic delivery of services, but resulted in fewer dollars going to property tax relief and greater property tax cap losses to local units of government," he said in a statement. "When errors of this magnitude occur, it causes a significant loss of confidence in the system."
State Budget Director Adam Horst acknowledged that some local officials had raised concerns that the state distributions last year were inaccurate.
"It's unfortunate this error occurred," he said. "The most important thing that I believe is to restore confidence in that system, provide as much information as possible in as transparent a way as possible."
That is why the state will be paying for an outside audit to examine its processes, a plan Harper supported and Brown called "a most excellent idea."
More money
The error also means local governments owe the state far less than originally projected. In 2011, state budget officials told cities, towns and counties the state had overpaid them $500 million in local income tax revenue as a result of the economic recession and the process the state uses to estimate the payments.
After the error, that total debt was dropped to $150 million. Counties that owe money will see their future year revenues remain flat and the state will be reimbursed for any growth in income tax revenue until the debts are paid.
Local governments will still be splitting millions of dollars in unexpected revenues this year, and some officials know just where to spend it.
City Council President Tom Smith, R-1st, had no problems identifying the sole need where the new money should be invested.
"It's the kind of money I would put into the number one need in this community: Fixing roads and streets and sidewalks in neighborhoods," he said.
Harper agreed. "We desperately need concrete and asphalt street reconstruction," he said. "It is a terrible need."
Fort Wayne and Allen County both declined to give their employees raises this year, citing a lack of money to do so. In addition, the county decided to require its employees to contribute 3 percent of their wages toward their retirements – money that had been picked up by the government before. A large rollover balance from the previous year prompted the county to issue employee bonuses to offset this extra expense.
County officials on Thursday were less eager to offer specifics for how the money should be used.
County Councilman Darren Vogt, R-3rd, said it might make sense to use it for economic development to try to increase the long-term revenues of the county. He said he would not support using it for employee raises or other compensation because the county can't count on these large amounts of money to be found every year.
Brown said the commissioners could begin discussing the new revenue at their legislative meeting today, but it would be important to have talks with other people before rushing to spend the money.
"Quite honestly, it should be a collaborative effort between council and commissioners on where those dollars would best be served," she said.
http://www.journalgazette.net/article/20120406/LOCAL/304069968
