MEMORANDUM
CC: All Local Units in Levy Freeze
Counties
FROM: Micah G. Vincent,
Commissioner
RE: Levy Freeze Options for
2014
DATE:
October 3, 2013
On August 30, 2013
the Department of Local Government Finance (“Department”) certified the “levy
freeze” income tax rates pursuant to I.C. 6-3.5-1.5. These are the rates that
would need to be imposed to fully fund operating levy growth with income tax
instead of property tax.
The law
requires that the council adopt the Department-certified rate for years 1 and 2
only. This year, councils now have the
option of adopting the higher rate or leaving the rate the same. (Note that the
rate may not be reduced or rescinded.) This leaves councils with three options,
outlined on Page 2 of this memorandum.
The Department
needs to know which of the three options the council selects before we can begin
processing the 2014 budget order. Specifically, the Department needs to know
which growth factor to apply to the levies and how to allocate the levy freeze
revenues. The Department requests that all councils indicate in writing
which of the three options the council selects and submit that to Courtney
Schaafsma, Budget Division Director by November 1. This will allow the
Department to correctly administer the will of the council. Work on the county’s
budget order will be on hold until the information is submitted. Submission
of this information in advance of the November 1 deadline will put the county in
a better position to ensure on-time billing.
Please note that
Department field staff conducted budget workshops with the assumption that the
levy would remain frozen (option 1 or option 2). Units in counties where option
3 is under consideration should independently review their advertising to ensure
that the advertised levy can accommodate levy growth. The Department will not
certify a levy that is greater than what was advertised by the unit.
If you have any
questions, please contact Courtney Schaafsma, Budget Director, at cschaafsma@dlgf.in.gov or
317.234.3937.
Options for 2014 Funding for Counties adopting LOIT Levy
Freeze
OPTION
1:
Adopt the
Department-certified income tax rate and keep the levy frozen. If this option is
selected, the levy growth factor on operating funds would be 0% and the growth
would be fully funded from income tax.
OPTION
2:
Keep the income tax
rate the same and keep the levy frozen. If this option is selected, the levy
growth factor on operating funds would be 0% and the revenue raised from the
income tax rate would be distributed in proportion to the levy freeze amount
calculated under I.C. 6-3.5-1.5. For example, if the total levy freeze amount in
the county were $1,000,000 and the income tax revenue were $750,000, each unit
within the county would have only 75% of its growth funded with income tax
revenues. The remaining growth would not be funded from current-year revenues.
Pursuant to I.C. 6-3.5-1.1-24(o) and I.C. 6-3.5-6-30(o), money may be
distributed from the county stabilization fund if the certified distribution for
levy freeze is less than the levy freeze amount for that year.
OPTION 3:
Keep the income tax
rate the same and allow the levy growth to come from property taxes. If this
option is selected, then the levy growth factor on operating funds is 2.6%, and
the revenue generated from the income tax funds prior year growth only. Pursuant
to I.C. 6-3.5-1.1-24(o) and I.C. 6-3.5-6-30(o), money may be distributed from
the county stabilization fund if the certified distribution for levy freeze is
less than the levy freeze amount for that year.
