Wednesday, October 31, 2012

Mayor Outlines Plan for Use of Fort Wayne's "Legacy Funds"

From the Fort Wayne News-Sentinel:

Mayor Tom Henry’s plan for the city’s $75 million “Legacy” fund calls for $30 million to be set aside for the long-term, while millions more could go toward a list of special projects.
For the first time, Henry publicly discussed his plans for the money Tuesday in a news conference and presentation to City Council. Under the mayor’s plan, the city would use up to $7 million of the money in the next two years for projects focused on downtown, riverfront and youth development.
“The Legacy process has allowed us to look to the future, to think long-term, to be bold,” Henry said in prepared remarks.
The city can already access about $48 million of the total fund – created from Indiana Michigan Power’s lease and purchase of the old City Light utility – with $30 million to be saved and the other $18 million available for projects. Another $28 million will come over the next 12 years in annual payments from I&M.
Any spending from the Legacy funds will likely require approval by both the mayor and a 6-3 “super majority” of council. An ordinance setting ground rules for accessing the funds is expected to come before council Tuesday.
The Legacy money has already dominated recent council discussions, with some Republicans arguing that the funds should go toward property tax relief or pressing needs such as street repairs.
But council – even members who disagree with Henry’s philosophy on the money – gave the mayor’s ideas a warm reception Tuesday.
Seethe full article here:

Greenwood Borrows to Buy Building for City Hall

From the Johnson County Daily Journal:

Greenwood plans to buy a bigger city hall where most government offices would be located, but the full cost of the project isn’t known.

The city will borrow about $5 million for various projects, including purchasing the Presnell Cos. office tower downtown and consolidating most city offices in it. Renovations are expected to cost less than $2 million, but the exact cost won’t be known until architects come up with specific plans, said attorney Samuel Hodson, who advises the city on a number of issues.

Greenwood will buy the building with borrowed money but pay for the renovations with money from the city’s two tax-increment financing districts, Hodson said.

The city would borrow the $1.75 million needed to pay for the four-story office tower at the southwest corner of Main Street and Madison Avenue. The Greenwood City Council voted 8-1 Monday to approve loans for the purchase of the Presnell building, a splash pad at Pool Park, a fire truck and police cars and a jet plane hangar at Greenwood Municipal Airport. Part of the loan also would go to pay existing debt at the city-run airport.

Greenwood has reached a tentative agreement to buy the building out of foreclosure, Hodson said. The bank that owns the downtown office tower has agreed to the $1.75 million Greenwood has offered and is negotiating a contract.

Hitachi Powdered Metals Offered Tax Credits for Expansion in Greensburg

From the Indianapolis Business Journal:

A Japanese powdered metal components supplier said Tuesday that it plans to expand its operations in Greensburg, creating up to 60 jobs by 2014.

Hitachi Powdered Metals (USA) Inc., a subsidiary of Japan-based Hitachi Powdered Metals Co. Ltd., plans to invest $38.4 million to build and equip a second facility on its 30-acre campus in Decatur County.

The new, 128,000-square-foot plant, which is slated to open in August 2013, will house compacting presses, sintering furnaces, lathing and machining center work cells, heat treating equipment and office space.

The company, which currently has 156 full-time Indiana employees in Greensburg, has begun hiring additional manufacturing, engineering, maintenance and production workers.

The Indiana Economic Development Corp. offered Hitachi Powdered Metals up to $275,000 in tax credits and up to $150,000 in training grants based on the company's job-creation plans. The city of Greensburg will provide additional property tax abatement.

Terre Haute Passes 2013 Budget

From the Terre Haute Tribune-Star:

The City Council voted 6-3 Monday night to approve the City of Terre Haute 2013 budget.

The vote sets the stage for city officials to find approximately $2.5 million in new revenue, new budget cuts or some of each to make the 2013 budget a “balanced” budget.

Councilmen Neil Garrison, John Mullican and Don Morris voted against the budget. The remaining six councilmen, Bob All, Amy Auler, George Azar, Jim Chalos, Norm Loudermilk and Todd Nation, voted in favor.

Approving the budget was important to ensure the city receives its maximum possible revenue from the state, said councilman Chalos during about 45 minutes of discussion prior to the vote.

“We’ve got to make sure we maximize this levy,” Chalos said.

Just because the council approved the budget, the city is not obligated to spend the full amount, added Mayor Duke Bennett. He presented figures to the council at the beginning of Monday night’s special meeting showing that the city has spent nearly $12 million less than approved in past budgets since 2008.

Passage of the budget now sets the stage for the city to fill a multi-million dollar deficit in its general fund, which finances day-to-day city expenses.

Some of the gap can be filled by moving funds from other city accounts, such as the “rainy day” fund, Bennett has said. Other funding can be obtained through “payments in lieu of taxes” from the city’s wastewater utility and from a one-time sale of city property. The rest — about $2.5 million — will have to come from cuts or from a new fee for trash, leaf and limb removal, the mayor said.

The city’s 2013 budget next goes to the Indiana Department of Local Government Finance for final approval. That should happen early next year, Bennett said.

Evansville Resident Argues for Consolidation

From the Evansville Courier & Press:

Are we tardy in unifying our Evansville City and Vanderburgh County governments? Many nearby cities, such as Nashville, Indianapolis and Lexington, have long ago succeeded in unifying these duplicative units of government. Is it time we do likewise?
The question before us as we consider the Nov. 6 referendum about reorganizing our local government is why vote "Yes,", or why vote "No." Those who remonstrate against this referendum's reform and encourage us to vote "No" have persistently argued that more units of government offer greater checks and balances. They contend more government is better. As one who has represented both remonstrators and petitioners for decades before these governmental units, I must say unequivocally — it is mostly detrimental having more local government units. Little good is derived from these added units layered on top of our already burdensome and growing state and federal bureaucracies. Having both a Mayor and three County Commissioners, who are many times at odds on key policies and initiatives, no longer makes sense for one of Indiana's smallest geographic counties. The outdated separation of our City and County governments often unnecessarily divides us and leads to more expensive conflicts and duplication, rather than beneficial checks and balances.
Remonstrators to the passage of this referendum's unifying reforms contend that it is fair to tax city residents for sheriff's patrols that do not serve the majority of our Vanderburgh County residents' homes. Those same remonstrationers, who mostly live outside the city limits, then ironically argue it is fair that they not be taxed for the police patrols that benefit them while working and shopping daily in the city limits. Law enforcement is our local governments' largest budgetary line item. Why should city residents (who incidentally represent 2/3 of Vanderburgh County's population) pay for both police and sheriff patrols, while the other Vanderburgh County residents living outside the city limits pay for just one. Could this really be the selfish motivation for why some would ask that you vote "No"?
The Reorganization plan that is before us has been thoroughly vetted and adopted by a diverse volunteer citizen committee that included rural and urban residents. This plan was then legislatively revised and affirmed by both our City and County elected governments. This Reorganization plan was heavily debated and as adopted contains numerous compromises to accommodate both the concerns for the rural and urban residents. This plan puts in place a more representative structure of local government, in contrast to our current system, which continually divides us. While uniting us, this plan provides for a more nimble local governmental structure. This structure will allow us to more effectively compete with others in our swiftly changing global economy.
Over the last 30 years we have extensively studied local government reform. Our leaders have visited with officials and taxpayers in Nashville, Lexington and Louisville. Never has it been found in those studies that a referendum has been organized to repeal their unifications once passed. Our own single unified Vanderburgh County school system has likewise served us well for decades. Never has an effort ever been truly advanced for repealing this unification. If local government unification were so bad, then why have all of those efforts withstood the test of time? Like other cities and our very own school system, now is the time that we too accomplish a similar unification of our local government's administrative, fiscal and legislative affairs.
To vote "No" will result in furthering the harsh process of random annexations on our rural subdivisions. To vote "No" denies our rural residents a right to vote for our mayor. To vote "No" is to artificially see Evansville as a smaller place in the important census and atlas listings relied upon by economic development prospects. To vote "No" is to say we are looking backward and not forward. If you are instead forward looking, if you see annexation as an unjust, divisive and costly means to growth, if you want all county residents to vote for our mayor, and if you want a community that better competes statistically in the world economy, then vote "Yes."

Cloverdale Passes 2013 Budget

From the Greencastle Banner-Graphic:

It was one of the quickest meetings in months for the Cloverdale Town Council as it held a public hearing Monday evening to pass the 2013 budget.

In a previous meeting last week, the budget was tabled as the council waited for more information regarding two funds, the Riverboat Fund and the Rainy Day Fund.

Previous advertisements for the budget included substantial amounts in both funds, however when the council went to pass the budget, those amounts had been cut.

"There was no money that was cut," council vice president Dennis Padgett said. "The money for those funds comes in through tax money, and that money has not come in yet."

With the entire council present, the 2013 budget was authorized to be sent on to the Department of Local Government and Funding in a mere five-minute meeting.

The next town council meeting is scheduled for 7 p.m. Tuesday, Nov. 13.

New Albany Passes 2013 Budget

From the Jeffersonville News and Tribune:

The New Albany City Council approved the more than $20 million general fund budget for 2013 by a 6-2 vote Monday.

Included in the budget is  a 2 percent pay raise for most city employees and the shifting of $600,000 in 911 dispatch costs to the Economic Development Income Tax account.

Those changes in the budget from 2012 to 2013 were the primary reasons Councilman Bob Caesar said he voted against the financial plan.

The pay raises are primarily for non bargaining employees, who haven’t received a salary increase in four years though some have garnered one-time bonuses in the past.

Police and fire departments aren’t included in the pay increases, but public safety workers receive an annual 1 percent longevity raise through their union contracts with the city.

Caesar said he disagreed with the flat pay raise structure.

“I really believe that they all deserve it, but I think it would have been much better to have given the raises based on job performance,” he said Tuesday.

Caesar said moving the 911 budget to the EDIT account and away from the general fund could cost the city money in the future.

He said cities aren’t required to have a 911 center, only the county is, and that the state could ultimately remove funds it allots to New Albany for emergency dispatch if the funds aren’t used for the service.

Shane Gibson, an attorney for Mayor Jeff Gahan’s administration, said in September the state was considering automatically deducting 911 funding amounts from local property tax revenue to foot the operation.

The move could reduce the city’s levy increase because New Albany’s total revenue would be lowered.

Caesar said he still supports merging the city and county dispatch centers — a move which failed to pass the council last year. Gahan voted against the merger as a member of that council.

Howard County Auditor Reminds Property Owners to File Homestead Verification Forms

From the Kokomo Tribune:

Two years ago, Wells’ office mailed homestead verification forms to every homeowner in Howard County. The state Department of Local Government Finance, at the behest of the Legislature, ordered all county auditors to ensure homeowners were claiming only one homestead property tax credit in the U.S.

Two months after that initial mailing, fewer than 50 percent of homeowners had filled out and filed the state-mandated paperwork. A quarter of those filings were incomplete.

Spring and fall tax statements were mailed before this year’s Easter holiday, and Wells told us then that 25 percent of the statements included yet another homestead verification form for completion.

Wells’ staff soon will start removing homestead credits from those homeowners who’ve failed to verify their tax status with the county these past two years. But beginning Friday, they’ll mail one last form to the 13 percent of Howard County homeowners who’ve ignored the earlier mailings.

If you receive a pink-colored form from the Howard County Auditor’s Office, fill it out and return it. Put it at the top of your to-do list.

A homeowner’s homestead credit often is the most valuable tax deduction a middle-class homeowner receives. It reduces the taxable assessment of your home by 60 percent or $45,000, whichever is less.

If you did not receive a pink form from the auditor’s office, you’ve properly filled out one of the previous mailings, Wells tells us. You’re among the estimated 20,000 in Howard County who have.

DLGF Issues Updated Cost Information for 2013 Annual Adjustments


TO:                 Assessing Officials and Vendors

FROM:           Barry Wood, Assessment Division Director

RE:                 Release of Updated Cost Information for 2013 Annual Adjustment

DATE:           October 31, 2012

The Department of Local Government Finance (“Department”) is releasing updated cost schedules for the 2013 Annual Adjustment. This release includes all cost schedules in Appendix C and Appendix G of the current Real Property Guidelines, including the Location Cost Modifier.

These updated cost schedules should be used to establish the replacement cost new (RCN) for residential, commercial, and industrial improvements for the 2013 Annual Adjustment (2013 pay 2014). Adjusting the RCN for accumulated depreciation provides one estimate of the property’s assessed value.However, the assessor should adjust this cost estimate with local market information such as sales data to determine the market value-in-use of the subject property prior to tax billing.

The Department is in the process of updating a depreciation schedule for the 2014 Assessment date (2014 pay 2015). An update for the 2013 assessment date is not possible at this time because of the need for additional assessment data comparing the costs and sales of comparable properties. Note that the depreciation base year for the 2013 Annual Adjustment will be March 1, 2013.

Scope of the Update

The cost schedules were updated with cost data from the Craftsman cost service. The costs used are listed in the 2012 Craftsman National Construction Estimator (NCE) and 2012 Craftsman National Building Cost Manual (NBC Manual).

Most cost schedules were updated with the material, labor, and equipment costs for the different unit costs used in the respective cost model. The Craftsman Area Modification Factors for the Indianapolis zip code 46204 were applied to each of these 3 costs. These factors are available in the Craftsman National Estimator software program, which is bundled with the 2012 NCE. The factors in this program are stratified by zip code, and more accurate than the factors listed in the print edition of the NCE. The factors are:

·         Materials:        1.00
·         Labor:              1.19
·         Equipment:      1.00

When unit cost data was not available, cost schedules were adjusted with factors representing the average increase in construction costs from 2011 to 2012. These factors are listed in the Building Cost Historical Index table of the NBC Manual. Different factors were used for different types of construction. The factors are:

·         Wood Frame:              1.04
·         Masonry/Concrete:      1.01
·         Steel:                           1.12
·         Agricultural:                1.02

When a general cost factor was needed, the average of the wood frame and masonry/concrete factors (1.025) was used.

All unit costs include the contractor’s overhead and markup. Following the 2012 NCE, this was set at 25% of the unit cost. As in the 2011 cost update, a Verified Economic Modifier (VEM) was calculated from residential new home costs to adjust the cost schedules to the Indiana market. As in 2011, the VEM adjusted the schedules downward by 30%: therefore, the net adjustment to Craftsman unit costs for overhead, markup, and current Indiana economic conditions is -5%.

Summary of Key Changes in Updated Costs

Primary Cost Schedules

·         Costs in the Dwelling Base Rate schedule increased. On average, first floor dwelling costs increased 2% while second floor dwelling costs increased 4%. Brick costs increased about 1% more than frame costs. Attic costs increased 9% on average for attics with and without finish.

·         Costs in the General Mercantile (GCM) schedule increased 1% on average, except for upper floor costs which increased 3% on average.

·         Costs in the General Industrial (GCI) schedule increased 2% on average. The largest change was in first floor semi-finished costs, which increased 5% to 9% for some use types. Wall height adjustment costs also changed more than average, with Type 1 and Type 2 walls decreasing 4% on average and Type 3 walls increasing 10% on average.

·         Costs in the General Residential (GCR) schedule changed very little, except for the Basement Apartment costs which decreased by 4% on average.

Auxiliary Cost Schedules

·         Specialty plumbing item costs decreased by an average of 36%. This substantial decrease is due to changes in Craftsman’s methodology for pricing saunas and other specialty plumbing items.

·         Car shed costs increased by 25% on average and swimming pool enclosures increased by an average of 22%. In both cases, the increases are concentrated on structures with very low areas. The increases are due to economy of scale factors and increases in Craftsman unit costs.

·         Service stations and public restroom buildings increased by an average of 12%. These items are priced from base rates provided by Craftsman, and the increase is due to the increase in the base rates.

·         Some agricultural building costs increased because of changes the Department made in our cost models. The largest increases are on very small structures that should not be regularly encountered in normal assessment practice. The next section explains these cost updates in more detail.

Updated Pole-Frame Cost Model

In addition to updating the models with 2012 Craftsman costs, the cost model for pole-frame buildings was re-specified. This model is used to price structures in Schedule A.4: GCK Base Rates.

To design the revised pole-frame model, the Department reviewed building plans and construction methods on pole-frame buildings to determine standard practices used in contemporary pole-frame construction. Based on this review, a model was designed that detailed the material, labor, and equipment costs typical of pole-frame construction. Model parameters such as total square footage and were estimated from data on Indiana pole-frame structures. Field reviews of pole-frame structures were also conducted to reconcile typical pole-frame construction with actual Indiana pole-frame structures.

Based on this analysis, several models were developed with different pole spacing and estimates of overhead and markup. The final model was reconciled with cost estimates from three Indiana pole-frame builders. The resulting model represents the typical cost of constructing different size pole-frame buildings, and explains in detail the assumptions made by the Department to value these buildings.

Updated Agricultural Structure Cost Models

The cost models for several types of agricultural structures were also re-specified. This is necessary because the assumptions used in current models for these schedules are no longer valid: for example, more restrictive environmental standards mean that hog pits are more expensive to construct than in the past. Cost models that use pole-frame construction also needed to be updated since the pole-frame model was updated. The updated models are:

·         Type (3) Barns and Sheds
·         Hog Confinement
·         Veal Confinement
·         Poultry Confinement
·         Milking Parlor
·         Milk House

For each model, the Department examined construction blueprints to determine typical material, labor, and material costs used in construction. Field visits and property record cards of representative Indiana structures were also consulted. Industry documents were also reviewed to determined legal or best practice guidelines for animal housing and maintenance: for example, the required lighting and ventilation for a modern poultry confinement. For each model, parameters such as the economy of scale were estimated from Indiana data. Each model was also reconciled with Indiana builder quotes or square-foot base rates for similar structures from the Craftsman NBC Manual.

Copies of the individual cost models and all supporting documentation used in their construction are available upon request.

If you have any questions, please contact Barry Wood, Assessment Division Director, at 317.232.3762 or; or David Schwab, Senior Statistician/Application Systems Analyst, at 317.234.5861 or

Revenue Denies Refund of Interest Charges

Taxpayer is in the home improvements business. Taxpayer was audited by the Indiana Department of Revenue ("Department") for Sales and Use Tax. After the audit, Taxpayer filed a protest regarding the interest that was assessed.

Taxpayer requests the waiver of interest that was assessed for "the sales/use audits performed on [Taxpayer] for years ending '08, '09, and '10...." Taxpayer states in pertinent part in Taxpayer's protest letter:

My rationale being that the entities that did not charge sufficient tax did so unbeknownst to me.

At the hearing Taxpayer reiterated that if Taxpayer would have been aware of the tax that was owed, Taxpayer would have paid it. Taxpayer also stated that one of the companies that it purchased from erroneously had Taxpayer listed as a not-for-profit.

Regarding interest, IC § 6-8.1-10-1(e) states:

Except as provided by IC 6-8.1-3-17(c) and IC 6-8.1-5-2, the department may not waive the interest imposed under this section.

The exceptions in the first part of IC § 6-8.1-10-1(e) are not applicable to Taxpayer. Thus the Department is unable to waive the interest. Taxpayer's protest is denied.

DLGF Publishes Updated Location Cost Modifiers


TO:                 Assessing Officials and Vendors

FROM:           Barry Wood, Assessment Division Director

RE:                 Updated Location Cost Modifiers for 2013 Annual Adjustment

DATE:           October 31, 2012

The Department has released updated Location Cost Modifiers (LCMs) as part of the cost update for the 2013 Annual Adjustment. These modifiers are detailed on the final pages of Appendix C and Appendix G. A separate list of the modifiers for each county also accompanies this memo. As in prior years, the LCMs are the same for residential and commercial property.

The Department provides this information for counties to adjust their costs for local market conditions. Counties may develop their own LCMs through analysis of local building costs information. The Department must approve a county-developed LCM prior to its use. Counties are encouraged to develop their own LCM if possible to incorporate their knowledge of local conditions.

The updated LCMs were calculated via the same process used in the 2011 cost update. First, Area Modification Factors from the 2012 Craftsman Nation Construction Estimator were used to derive a base factor for each county. These base factors were then divided by the base factor for Marion County, so that the resultant LCM is the estimated change in building costs relative to building costs in Marion County.

Since the Area Modification Factors are stratified by zip code, counties containing multiple zip codes will have more than one factor. As in the 2011 update, the LCM for these counties is the weighted average of the factors, with the weights based on the percent of land area allocated to each zip code in the county.

Note that the base factor for Marion County rose from 1.05 to 1.07. Since the LCM estimates local costs relative to Marion County, the updated LCM may differ from the 2011 LCM even if the cost of construction in the county has not changed.

Please remember that Indiana’s assessment standard is market value-in-use, which means that final assessed values must be determined through analysis of the local market in each county. Therefore, no matter what cost approach value is initially calculated, it must be adjusted to the final assessed value by applying the factors that have been determined through market analysis. Hence, use of a Location Cost Multiplier may be unnecessary.

Questions or comments may be directed to Barry Wood, the Department’s Assessment Division Director, at 317.232.2762 or
Area Modification Factors
Location, Zip                              Material        Labor           Equip.         Avg.
Indiana Average                           -2                 -2                 -1                -2%
Aurora, 470                                 -1                 1                  0                 -0%
Bloomington, 474                         1                  -5                 0                 -2%
Columbus, 472                            0                  -7                 0                 -3%
Elkhart, 465                                -2                 -3                 -1                -2%
Evansville, 476-477                      -2                 18                -1                7%
Fort Wayne, 467-468                    -3                 0                  -1                -1%
Gary, 463-464                             -4                 27                -1                11%
Indianapolis, 460-462                   -1                 16                0                 7%
Jasper, 475                                 -1                 -17               0                 -9%
Jeffersonville, 471                        0                  -11               0                 -5%
Kokomo, 469                               -2                 -15               -1                -8%
Lafayette, 479                             -1                 -10               0                 -5%
Muncie, 473                                -4                 -19               -1                -11%
South Bend, 466                         -4                   2                -1                -1%
Terre Haute, 478                         -4                   0                -1                -2%

Tuesday, October 30, 2012

Vincennes Considers Fee to Fund Trash Collection

From the Vincennes Sun-Commercial:

While city officials continue thrashing out some kind of solution to the problem of funding the city’s trash collection system, other communities facing the same problem are opting to increase fees.

Princeton officials recently implemented an increase. This summer the city council voted to raise the fee from $6 per month, which it had been since the 1990s, to $10. It, too, is billed along with water and sewer services.

Seymour, which uses the same automated trash truck Vincennes does, adds $3 per month to the sewer bill as well. Bedford’s monthly fee is $12.98 per month.

Washington two years ago increased its trash collection fee — one billed right along with a residents’ water and sewer bill — from $2 per month to $15 per month.

Terre Haute is looking to implement a fee. It currently contracts with Republic Services to pick up trash without charge to residents.

But that may change as the city council considers adopting a $9 per month fee to cover its contract now that property tax revenue has decreased.

The alternative is cutting the cost of the contract, about $2.6 million, from the annual budget, which means laying off between 35-40 workers, about 8 percent of its total staff.

 A survey of nearly all Indiana cities done by the Indiana Association of Cities and Towns revealed that the majority of municipalities issue a monthly bill to fund trash collection. Fees range from $3 per month all the way up to $15.

A couple cities  still use a sticker system like Vincennes; a handful don’t charge anything at all.

Months ago street department superintendent Bryce Anderson said a random check revealed that the city stood to lose thousands per year with the current sticker system.

The sticker fee was more than doubled when the new automated truck was brought online two years ago. It only requires one man to operate; therefore no one was checking to be sure the trash bags — which are now required to be in special totes — had been stickered.

People, Anderson said, were abusing the system, and the city was losing money.

The number of people cheating the system decreased once the street department began cracking down, but council members believe a change of come kind is necessary.

“We’re still looking at different options,” Mayor Joe Yochum said. “And we keep getting held up because every time I check into something, another list of questions needs to be addressed.”

Several possibilities have been tossed out for consideration, namely a fee that would be included on a residents’ sewer and water bills.

But some homeowners, especially the elderly who don’t produce much trash, fought against the implementation of an across-the-board fee for all.

Yochum indicated that finding a way out of the current lease agreement, put into place by former mayor Al Baldwin, for the automated truck, one that Yochum said costs $500,000 a year, isn’t out of the question.

Neither is hiring a private company, much like Terre Haute did.

Anderson City Council Finally Approves 2013 Budget

From the Anderson Herald-Bulletin:

After taking a week and working with the Smith administration to limit public safety layoffs next year, the City Council finally approved a budget for fiscal 2013 Monday night.

The $63.2 million spending plan unveiled by Mayor Kevin Smith last month called for the layoff of 20 firefighters, nine police officers, three employees in the office of municipal development, and three employees in the street department.

By the time the City Council voted on a final spending plan after two hours of hard debate and testimony, the number of layoffs had been whittled down to nine firefighters, three police officers — although that job cut will be delayed until September 2013 — and one municipal development employee.

In the end, no one was happy with the final results.

Smith said the budget will leave the city with no operating balance, “little if any contingency funds,” and ongoing uncertainty about how much tax revenue the city will actually receive.

While the presidents of the police and fire unions said they appreciated the difficult budget choices the council was forced to make, they continued to question the need for any layoffs up until the moment of the City Council’s 8-1 vote. Councilman Ollie Dixon, D-4th District, cast the dissenting vote against the budget.

“It’s been a long, long process to get to this point,” said City Council Vice President David Eicks, D-at large, who led the council’s effort to minimize public safety cuts. “The intent of this was to try and eliminate any layoffs.”

He proposed a total of $1.3 million in alternative cuts — from police and fire training accounts, a fire department building account, legal, municipal development, park and motor vehicle highway funds and what’s left of the city’s share of the repealed wheel tax — to restore as many positions as possible.

Dixon blamed the Madison County Council for Anderson’s budget woes, especially its decision in late February to repeal the wheel tax.

“We wouldn’t be having this discussion tonight if not for the repeal of the wheel tax,” Dixon said. “If we had the wheel tax, we wouldn’t be having to lay off public safety employees.”

Fort Wayne to Consider Abatement for DOWCO Investment

From the Fort Wayne Journal Gazette:

DOWCO, Inc., a Wisconsin-based company, announced that it has outgrown its current location at 2827 Freeman Street. The company will be moving to a 41,840 square foot facility at 3505 Independence Drive. The expansion will allow for 18 new positions. Bill Cupp of CBRE | Sturges represented the owner of the building in the real estate transaction.

The Fort Wayne City Council will consider approval of tax abatement for DOWCO’s planned investment in new manufacturing equipment and building improvements in November.

MacAllister Machinery Offered Conditional Tax Credits for Expansion in Washington

From the Northwest Indiana Times:

A heavy equipment distributor says it will spend nearly $9 million to more than double the size of its southwestern Indiana facility.
MacAllister Machinery Co. announced Tuesday its plans to build and equip a 50,000-square-foot expansion of its facility in the Daviess County city of Washington. The company says the expansion will house sales, parts and services for its inventory of new and used Caterpillar heavy and compact construction equipment and generators.
The Indianapolis-based company says it expects to add perhaps 60 jobs over the next four years in Washington. MacAllister says it now has nearly 100 employees in Daviess County among its more than 750 workers at 20 Indiana locations.
The Indiana Economic Development Corp. offered MacAllister up to $800,000 in conditional tax credits and training grants.

Tax Court Finds Items used for Estimate Preparations, Machinery Reassembly and Lawn Care Were Not Entitled to Public Transportation Exemption for Equipment Moving Company

The parties agree about how Wendt uses the property at issue, and they agree that Wendt is generally in the business of providing public transportation.  (See Oral Argument Tr. at 4-5, 25-26.)  The essence of the parties’ dispute focuses on the proper way to determine whether Wendt’s purchases of tangible personal property are entitled to the public transportation exemption.  Wendt claims the property at issue is entitled to exemption because it is predominantly used or consumed within its integrated public transportation process, while the Department counters that none of the property at issue is exempt because it is not directly used to furnish public transportation.

Wendt claims that nearly all of its purchases of tangible personal property at issue  are  exempt  because it uses or consumes the property to provide public transportation in its unique, integrated public transportation process.  (See Pet’r Br. at 21-22 (footnote added).)   Wendt describes  its integrated process  as  encompassing a bundle of services made up of several integrated, indivisible, and continuous steps that are all necessary or immediately linked to its provision of public transportation.  (See Oral Argument Tr. at 6, 23; Pet’r Reply Br. at 1-2; Pet’r Br. at 18-20.)  Wendt contends that each phase of its integrated process, beginning at the moment a customer calls for an estimate and  ending with the  reassembly of the machinery at the destination, involves the provision of public transportation.  (See Oral Argument Tr. at 4-11.)

The Department responds, however, that Wendt’s services are provided not as an integrated public transportation process, but as nothing more than a unique, all-in one business model that offers a menu of à la carte services, some that are public transportation and some that are not.  (See Oral Argument Tr. at 32-38, 41-42; Resp’t Br. at 5-6 (footnote added).)    Explaining, the Department states that Wendt’s competitors provide many of the same services on a stand-alone basis, but the property used to provide those individual services  is ineligible for exemption; thus,  Wendt’s similar services must be ineligible. (See Oral Argument Tr. at 23, 32, 36-41; Resp’t Br. at 3, 5 (footnote added).)  The Department concludes that given individual scrutiny, not evaluation based on the relationship to Wendt’s core activity of transporting machinery on the highways, the property at issue is not exempt because it is not “directly used or consumed in providing public transportation.”    (See Oral Argument Tr. at 23, 36-39
(footnote added)); see also I.C. § 6-2.5-5-27.

Direct Use

As discussed above, Wendt’s property will qualify for exemption if the evidence shows that it is “necessary and integral” to Wendt’s provision of public  transportation services.  See USAir, 542 N.E.2d at 1036.  Moreover, the exemption extends to items directly used in a continuous, integrated public transportation process.  See Harbor Belt, 460 N.E.2d at 175.  Accordingly, the critical question here is whether Wendt’s property is necessary and integral to Wendt’s integrated public transportation process.

Phase 1:  Project Planning

As  detailed in the facts above, Wendt claims its  public  transportation process begins when it prepares estimates for potential customers.   Wendt’s  estimates are better characterized as sales activity, however, because they are intended  to present the lowest bid and obtain a customer.  (See Resp’t Des’g Evid. Vol. 2, Ex. 20 at 27-28.)  Thus, while Wendt’s  estimates  may be connected to  its provision of public transportation, they do not always garner a customer and therefore are not necessary and integral to furnishing public transportation.  Moreover, this conclusion is consistent with those portions of the public transportation regulations that deem property used for sales and  other non-operational activities, such as cost projections, ineligible for exemption.  See 45 IND. ADMIN. CODE 2.2-5-61(e), (m) (2001); see also 45 IND. ADMIN.CODE 2.2-5-62 (f), (k) (2001).  Accordingly, the Court finds that preparing estimates is not part of Wendt’s public transportation process and, therefore, property used in providing these services is not necessary and integral to Wendt’s integrated public transportation process. 

In this phase, Wendt also plans transportation routes and obtains travel permits.  Both are necessary and integral to  Wendt’s public transportation process because Wendt could not legally haul oversized machinery over the highways without travel permits for the route being traveled.  Moreover, the public transportation regulations deem a common carrier’s purchases  of  items  to comply with federal and state mandates, as reasonably necessary to the rendering of public transportation.  See 45 I.A.C. 2.2-5-61(d); see also 45 I.A.C. 2.2-5-62(e).  Therefore, property used to plan the routes and obtain the travel permits is necessary and integral to Wendt’s integrated public transportation process.

Phase 2:  Pre-transportation Preparations

  As stated  in the facts  above, Wendt’s  pre-transportation preparations involve the disassembly, loading, and securing of oversized machinery onto the flatbed trucks for transport.  Disassembly and loading are necessary and integral to Wendt’s public transportation process because without disassembly, the machinery would be too heavy for loading and too  large  for legal road transport.  As just mentioned,  a common carrier’s  activities  to comply with legal requirements are necessary and integral to furnishing  public transportation.   See 45 I.A.C. 2.2-5-61(d);  see also 45 I.A.C. 2.2-5-62(e); USAir,  582 N.E.2d at 778 (explaining that the public transportation  exemption extends to items that are legally required for continued operations).  Furthermore, although pre-transportation activities generally are excluded from the definition of public transportation, property used for the “loading and unloading of persons or property into or from transportation vehicles” is expressly included within the scope of public transportation.  See 45 I.A.C. 2.2-5-61(f), (j); see also 45 I.A.C. 2.2-5-62(g).  Thus, the Court finds that Wendt’s property used to disassemble, load, and secure its customer’s machinery for subsequent movement over the highways is necessary and integral to Wendt’s public transportation process. 

Phase 3:  Transportation

  This phase involves  the seminal activities of Wendt’s public transportation process. Wendt hauls its customers’ machinery on the highways,  provides escort services, and unloads the machinery at the customer’s destination.  Hauling oversizedmachinery over the state and federal  highways is necessary and integral to Wendt’s public transportation process because it embodies the very essence of public transportation:  the movement of another’s property for consideration.  See 45 I.A.C. 2.2-5-61(b), (f); 45 I.A.C. 2.2-5-62(c), (g).  Escort services are required by federal and state law and thus are necessary and integral to the provision of public transportation.  See, e.g., (detailing Indiana’s escort vehicle requirements).  In addition, unloading property from transportation vehicles is expressly included within the scope of public transportation.   See 45 I.A.C. 2.2-5-61(f), (j);  see also 45 I.A.C. 2.2-5-62(g).  Accordingly, the Court finds that Wendt’s property used to transport, escort, and secure its customers’ machinery  is  necessary and integral to Wendt’s public transportation process. 

Phase 4:  Reassembly

As described in the facts above, Wendt reassembles  the oversized machinery inside the customer’s new factory location.  Wendt performs its reassembly services post-delivery, and  reassembly services have no apparent link to any federal or state mandates.   Accordingly,  Wendt’s  reassembly  services are a convenience for  its customers that are incidental to its provision of public transportation and, thus, they fall outside the ambit of public transportation.  See USAir, 582 at 779 (affirming the denial of exemption on certain food items that were “incidental” to the taxpayer’s transportation service).   Moreover, this finding is  also  consistent with the  public transportation regulations that  do not include  post-transportation activities in the definition of public transportation.  See 45 I.A.C. 2.2-5-61(f); 45 I.A.C. 2.2-5-62(g). 

Optional Services

During the years at issue, Wendt  also provided warehouse storage  exclusively for the temporary storage of its customers’ in-transit property.  (See Resp’t Des’g Evid. Vol. 2, Ex. 20 at 82-85.)  “[T]emporary storage is considered to be an integral part of rendering public transportation.”  45 I.A.C. 2.2-5-61(g).  Therefore, all tangible personal property used to provide warehouse storage services falls within  the  scope of public transportation. 

Wendt also transported its customers’ machinery to third party locations for repair services.  (See Trial Tr. at 59-61.)  When a common carrier moves another’s property over the highways for consideration, it is providing public transportation.  45 I.A.C. 2.2-5-61(b); 45 I.A.C. 2.2-5-62(c).  Therefore,  the property used to provide Wendt’s transport-for-repair services also falls within the scope of public transportation. 
In this case, the evidence shows that Wendt’s services are generally provided as a continuous, integrated process of transporting its customers’ oversized equipment on the highways.  Wendt’s process is integrated because each phase of Wendt’s business is interrelated and dependent upon the others.  For instance, without disassembling the machinery, it would be too large for road transport; without escorts accompanying the oversized loads along the highway, the equipment could not lawfully travel the roads; without using ties to secure the equipment to the trucks, efficient transportation could not be accomplished.  Moreover, an argument that others could not qualify for exemption by providing one  of Wendt’s component services on a stand-alone basis does not persuade the Court to disqualify individual elements of an integrated public transportation process from eligibility for exemption.

Predominant Use

Having decided what property Wendt uses for exempt and non-exempt purposes, the Court  now  considers  whether Wendt has shown that it  predominately  used  the tangible personal property at issue in providing public transportation.   The Court has acknowledged that there are many ways to show that items are predominantly used in an exempt manner. See Indiana Waste Systems Ind., Inc. v. Indiana Dep’t of State Revenue, 644 N.E.2d 960, 961-62 (Ind. Tax Ct. 1994).  For example, predominate use may be shown by providing credible testimony,  providing the ratio of income derived from the property’s exempt use to the income derived from its non-exempt use, providing the ratio of the time spent using the property in an exempt manner to the time it is used in a non-exempt manner,  or providing a similar ratio calculation based on volume.  See id.; Calcar Quarries, 394 N.E.2d at 941. 

Here, the evidence at trial established how Wendt used its property with respect to its public transportation process and optional services.  (See, e.g., Resp’t Des’g Evid. Vol. 2, Ex.  20 at 10-89; Ex. 24  at  5-6, 10-12.)   Furthermore, the  uncontroverted testimony of Mr. Jere Wendt, one of Wendt’s founding partners, established that, during  the years at issue, 70 percent of  the jobs Wendt performed involved the provision of public transportation.   (See Trial Tr. at 39-40,  61-73.)    The Court not only  finds Mr. Wendt’s testimony to be credible, but also finds that his testimony is corroborated by the
Department’s audit findings.  The auditor’s block sample shows that nearly 70 percent of Wendt’s jobs involved the exclusive provision of public transportation.  Accordingly, the evidence before the Court leads to only one reasonable conclusion:  between the 2001 and 2004 tax years, Wendt predominately used its property in providing public transportation, and the Department erred in concluding otherwise.

For the above-stated reasons, the Court AFFIRMS the Department’s determination that items predominately used for estimate preparations, machinery reassembly, and lawn care were  not  entitled to  the public transportation.  All of the Department’s  remaining  determinations, however,  are  REVERSED.   Accordingly, the Court REMANDS the matter to the Department and ORDERS it to make the necessary
determinations in accordance with this opinion.