MEETING
MINUTES
Meeting Date: November 13, 2013
Meeting Time: 9:00 A.M. Meeting Place: State House, 200 W. Washington
St., Room
431 Meeting City: Indianapolis, Indiana Meeting Number: 1
Members Present: Sen. Brandt Hershman, Chairperson;
Sen. Edward Charbonneau; Sen. Timothy Skinner; Rep. Eric Turner; Rep. Greg
Porter.
Members Absent: None.
The
meeting was called to order at 9:05 A.M.
I.
Effect of Circuit Breakers on Unprotected Taxes
Bob Sigalow of the Legislative Services Agency
provided the Commission with a memorandum regarding the effect of circuit
breaker credits on "unprotected" local government funds, sorted by
the amount of the loss, and also sorted by county. (See Exhibit A, "Effect
of Circuit Breaker Credits on Unprotected Funds".)
Mr. Sigalow explained the following: (1) Under
legislation passed in 2012, levies exempt from the application of circuit
breakers plus any debt service levies would be considered "protected
taxes". (2) Beginning with taxes paid in CY 2014, the protected taxes
collected will be allocated without any adjustment for circuit breaker credits,
and the entire tax loss due to the circuit breaker credits is to be allocated
only among the "unprotected funds" under this approach. (3) There are
four taxing units that would have lost 100% of their unprotected levies in 2013
to circuit breaker credits. (4) The average loss to school corporation
unprotected funds would have been just over 17%.
Denny Costerison, Executive Director of the Indiana
Association of School Business Officials, discussed a handout with the
Commission. (See Exhibit B, "Protected Taxes Testimony.") Mr.
Costerison discussed the history of the statute concerning protected levies,
including amendments passed in 2013. He testified that interested parties are
not looking to change the property tax caps or affect taxpayers, but they want
to make sure that the provisions concerning protected taxes do not have a
negative effect on school corporations. He explained that the potential impact
on school corporations is growing.
Mike Reuter,
Chief Financial Officer of Hamilton Southeastern Schools, noted that this issue
is not about asking for relief from the property tax caps or asking for more
money, but is instead about the allocation of funds. He testified that: (1)
this is not a suburban versus urban issue; (2) there is already an
"intercept" statute in place to protect bondholders; (3) changing how
protected taxes and unprotected taxes are allocated will not affect tax rates
for 2014, but will only affect how tax revenue is allocated; and (4) they are
asking for circuit breaker losses to be allocated among all funds, which is
what has been done since 2009.
Dr. Paul
Kaiser, Superintendent of Beech Grove City Schools, testified concerning Beech
Grove City School's experience with declining assessed valuation, cost-savings
initiatives, and an appeal to the Distressed Unit Appeal Board that was not
granted. Tom Keeley, Director of Business and Personnel of Beech Grove City
Schools, testified regarding the need for flexibility, and that the school
corporation is running out of options. Dr. Kaiser noted that: (1) the school
corporation has 624 transfer students, and this brings in over $3 million in
state support; and (2) they are asking for flexibility in refinancing debt.
(See Exhibit C.)
Mike Shafer, Chief Financial Officer of Zionsville
Community Schools, described steps that the school corporation has taken to
restructure after the property tax caps took effect (restructuring routes,
eliminating field trips, restructuring driver pay, requiring bus fees for
athletics), which lowered their transportation budget by 17%.
Janet
Gruwell, Business Manager, Concord Community Schools, testified regarding: (1)
problems arising from pre-2009 debt; (2) the loss of assessed valuation; and
(3) the need to rely on their general fund for transportation.
Brock Bowsher, Director of Finance and Operations,
Avon Community School Corporation, testified that: (1) the school corporation
has decreased transportation expenditures by 10% since 2009 (despite an
increase in enrollment); (2) protected taxes will lead to greater reductions in
transportation fund revenue; (3) buses have not been replaced according to the
bus replacement plan; and (4) they are asking for flexibility at the local
level.
Frank McWhorter, Chief Business Officer, New
Albany-Floyd County Consolidated School Corporation, testified that: (1) the
concept of protected taxes should either be repealed or be changed to allow
losses to spread over all funds; (2) protected taxes involves the issue of
allocation (and not the amount) of circuit breaker loss; and (3) local bond
ratings may ultimately be lower under the protected taxes approach. (See
Exhibit D, "New Albany Floyd County Consolidated School Corporation Impact
of Circuit Breakers and Protected Taxes," and Exhibit E, "School Debt Service Example of Line 11 Cash Balance Impact.")
Doug Hasler, Executive Director of Support Services,
Elkhart Community Schools, testified that: (1) they have suffered severe
impacts from circuit breaker losses; (2) they lowered their tax rate, but
circuit breaker losses still increased; (3) their assessed valuation has
declined 20% over the last five years; (4) he does not see positive effects for
bond ratings from the concept of protected taxes; and (5) two possible
solutions are: (a) delay or eliminate having protected taxes; or (b) allow a
local option income tax to replace circuit breaker losses (with a rate not to
exceed 1%).
Scott
Turney, Executive Director of the Indiana Small and Rural Schools Association,
testified that: (1) circuit breaker cap issues also affect smaller and rural
schools; (2) pre2009 debt, zeroing-out of transportation revenue, maintaining
buildings, and drops in assessed value are also issues; and (3) they are asking
for flexibility.
Tera Klutz,
Allen County Auditor and representing the Association of Indiana Counties,
testified that: (1) protected taxes will affect other units of local
government, not just school corporations; (2) the effect of protected taxes on
operating funds needs to be considered; and (3) the local budgeting process
needs to be addressed.
II.
Soil Productivity Factors
Cathy
Wolters, Department of Local Government Finance (DLGF) General Counsel, and
Barry Wood, DLGF Director of Assessment, explained the background regarding the
soil productivity issue and presented a memorandum to the Commission from DLGF
Commissioner Micah Vincent. (See Exhibit F.)
Phillip
Owens, Associate Professor, Purdue University Department of Agronomy, testified
regarding soil productivity factors. He testified that: (1) soils are not
equal; (2) in his analysis, he used the Dideriksen Model, which takes into
account soil properties, but not management; (3) he used the United States
Department of Agriculture (USDA) database and compared soils to get a ranking
factor; (4) there are still some questions about the USDA's data, which will
take at least three months to study; and (5) the factors are not ready to be
used at this point. (See Exhibit G.)
Katrina
Hall, Indiana Farm Bureau (IFB), testified that: (1) the IFB appreciates the
cooperation of the General Assembly in dealing with this issue, and that they
have had good cooperation from Purdue University and the DLGF; and (2) the
range of the new numbers seems reasonable, but they want to review the data
further and still need to review how each soil has changed.
Stacey
O'Day, Allen County Assessor, testified that: (1) they ran the new factors in
Allen County, and that they would result in an increase in assessments; and (2)
she is concerned that if the debate on this issue is not finished, it will
result in an assessment delay.
Bob Sigalow
of the Legislative Services Agency presented a memorandum to the Commission
concerning soil productivity factors. (See Exhibit H.)
The meeting
was adjourned at 11 :15 A.M.
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