Meeting Date: December 3, 2013 Meeting
Time: 9:00 A.M. Meeting Place: State House, 200 W. Washington
St.,
Room 431 Meeting City: Indianapolis, Indiana Meeting Number: 4
Members
Present: Sen. Brandt Hershman, Chairperson; Sen. Edward
Charbonneau; Sen. Timothy Skinner; Rep. Greg Porter.
Members
Absent: Rep. Eric Turner.
Sen.
Hershman called the fourth meeting ofthe Commission to order and introduced
former state senator Beverly Gard to speak on the topic of elected fiscal body
budget review for public libraries with appointed boards.
Public
Libraries
Ms.
Gard indicated that she is now an advocate for public libraries, serves on the
Hancock County Public Library Board, and is the Vice President of the Indiana
Library Federation. She spoke on behalf ofthe Hancock County Public Library
Board describing the history of the library, the library's long range plan, the
budget-making process, the use of reserves, and the library's unique use of the
economic development income tax. She described the coordination that occurs in
operating a public library, including State Library oversight. She opposed
control by an elected fiscal body over the budget ofa public library with an
appointed board without an appeal procedure. She said a fiscal body would have
to commit considerable time to understand a public library's budget. She
proposed binding review only if certain budget limits are exceeded. Ms. Gard
supplied two handouts: (1) The Hancock County Public Library October 2012
Strategic Plan (Exhibit A); and (2) The Hancock County Public Library Final
Capital Improvement Plan (Exhibit B).
Wendy
Phillips, Director for Carmel Clay Public Libraries and representing the
Indiana Library Federation, described the budget process for an appointed board
public library and said it works well and takes from June to January to
complete. She said the process is transparent, and she stated that the decision
makers are accountable. She explained that the appointed board system has
worked well for decades for public libraries, that a board is made up of
citizens who pay taxes that support the public library, that an appointing
authority can remove an appointment, and that board members are term limited.
She said board members take their responsibility very seriously. She objected
to adding more steps to the process. In response to Sen. Hershman, she added
that her budget will grow consistent with the growing population in her
district (approximately a few hundred thousand dollars in the annual budget).
Jos
Holman, representing the Indiana Library Federation, told the Commission that
public libraries are unique and unlike any other governmental unit. He said
public libraries are a source of community pride, are treasured assets, and
open to everyone. He added that public libraries serve a community's
informational needs and recreational interests. He provided various statistics
about public library use. In response to questions, he stated that coordination
among all interested parties is a key, especially with schools for example, and
that some public libraries, like the Vigo County Public Library, have had to
make cuts other public library districts have not had to make. He emphasized
that every public library district is unique.
Beverly
Martin, representing the Johnson County Public Library, indicted that she was
the former legislative chair for the Indiana Library Federation. She spoke on
the topic of public library district boundaries and noted that Sen. Walker had
been interested in boundaries and the issue of possibly making public library
boundaries co-terminus with a city or town. She agreed with the other
presenters that the appointed board system is working for public libraries. She
provided a map showing the public library districts in Indiana (Exhibit C).
Andrew
Berger, General Counsel for the Association of Indiana Counties, said the
Association's position is that taxes should be approved by elected officials
and that public libraries are now the only exception. He added that fiscal
bodies are experienced in reviewing budgets, that binding review will have
benefits, and that the fiscal body is accountable directly to the voters. He
suggested that a bigger picture review is important because of the property tax circuit
breaker caps and limited resources available to counties.
Sen. Skinner noted that an appointed public library board is
accountable and can make decisions without politics being a factor. He wondered
if appointed public library boards are out of control and said that fiscal
bodies tend to focus on dollars and cents and not the big picture.
Meredith
Carter, a member of the Hamilton County Council, said the Hamilton County
Public Library has seven appointed board members and emphasized that
communication is the key. He stated that the Council has a liaison with each
appointed board within the County and that the appointed board system has
worked fine in Hamilton County.
Township Assistance
The
Commission began the discussion of township assistance with Debbie Driskell and
Dawn Manfriedi, of the Indiana Township Association. They described the
township assistance program, the application process, and accounting for
administrative costs. Ms. Driskell explained that administrative costs include
expenditures that using normal nonprofit accounting would not be categorized as
administrative costs, so comparing administrative costs of the township program
to a nonprofit program is not appropriate. Ms. Manfriedi added that in Howard
County, Center Township, for example, administrative costs include managing
grants from the state. She noted that in nonprofit accounting this would be a
case management cost and not an administrative cost. They suggested that based
on their study of townships in Howard County, a different accounting method
should be used for medium and large townships.
Micah
Vincent, Commissioner of the Department of Local Government Finance, discussed
the provisions of HEA 1585-2013 that separated Lake County, Calumet Township's
maximum property tax levy between the township assistance program and other
township services. He noted that Lake County adopted an income tax so the levy
growth quotient now applies.
Sen.
Hershman commented that Calumet Township is now paying more in benefits that it
is spending on administration, which was not true in the past.
Curtis
Whittaker, a certified public accountant who is the financial advisor to
Calumet Township, described the Township's financial situation and in response
to Sen. Hershman emphasized that Gary and Calumet Township are unique because
of the property tax circuit breaker impact.
Property Tax Circuit Breaker
Report
Robert
Sigalow, Senior Fiscal Analyst for the Legislative Services Agency, briefly
reviewed the latest Property Tax Circuit Breaker Report (Exhibit D). Mr.
Sigalow commented on the total circuit breaker losses for 2013 and the 2014 and
2015 estimated losses. He mentioned that Allen County and Lake County adopted a
local income tax to provide property tax credits that impact the losses and
noted that LaPorte County is almost current in tax billings, so the Laporte
County data are much better than in previous reports.
After
a lunch break, the Commission resumed its meeting and began the afternoon
session with the topic of land banks.
Land Banks
Sen. Hershman introduced Rep. Clere who discussed his proposed
draft by describing it as a work in progress on the use of land banks. He
covered the legislative background of the issue and briefly discussed the
benefits of land banks.
Gina
Radice covered numerous issues and factors that are involved with the creation,
use, and success of land banks. She explained that the tax sale process in
Indiana is not a tool to get vacant and abandoned property back on the tax
rolls. She said that land banks create a path for vacant and abandoned
properties to be returned to productive use and to the tax base.
Sen.
Hershman, Sen. Charbonneau, Sen. Skinner, and Ms. Radice discussed various
problems with the tax sale process and how a land bank should be a self-sustaining
nonprofit arm of the local unit. She said a land bank should be run as a
business that maintains an accurate inventory of properties in an organized way
that is broadly accessible in the market. She added that the local government
unit should set priorities for the land bank, how it is funded, 'and what
happens with sale proceeds. She provided examples from Ohio and Michigan. She
noted that local governments typically benefit by getting the property back in
the tax base.
Adam
Thier and Jeff Roeder, of the Indianapolis Metropolitan Development Commission,
said the Commission holds about 1,000 properties, that there are thousands of parcels
in tax sale surplus still titled to the delinquent owner, and there are
thousands more properties in mortgage foreclosure. Mr. Thier emphasized that
there is no tax revenue from surplus properties and they have a negative impact
on neighborhoods and property values. He added that these vacant properties
cost the City in maintenance and require more police and fire services than
occupied properties. He noted that it also costs the City to demolish
structures at some point. He suggested that changes should be made to reduce
speculation at the tax sales and that the Commission supports the land bank
approach.
In
response to a question from Rep. Porter, Mr. Thier said community development
corporations are a major partner and would remain so.
Cindy
Land, Marion County Treasurer's Office, described Marion County's recent
history of tax sales and the process Marion County uses. She explained that
many parcels are not vacant or abandoned and that an expedited process can be
applied to vacant or abandoned properties. She expressed concern for property
owners who are having difficult times and the proposed increase in the
redemption rate makes it more difficult for an owner to redeem. She added that
when the County receives revenue, it is distributed to local units, whereas the
proposal would direct this revenue to the land bank. Ms. Land provided a
handout illustrating the Marion County tax sale process and provided data for
2012 and 2013 (Exhibit E).
Former
state representative William Crawford, Deputy Marion County Treasurer, spoke
about the success of the Marion County Treasurer in reducing the inventory of properties
from 8,000 to 4,000. He described how the installment payment system has kept
owners in their property. He added that county treasurers are directly
accountable to the voters unlike the proposed land bank board.
Andy Frazier, Executive Director, Indiana Association for
Community Economic Development, and Gina Leckron, State Director, Habitat for
Humanity of Indiana, both of whom work in redevelopment, stated their support
for the additional tool of a land bank. They explained that the tax sale
auction does not work for all properties and if redevelopment occurs there is
property tax base growth. They added that a land bank could focus on best uses
of vacant and abandoned properties instead of focusing only on revenue, which
is the case in the tax sale system. Ms. Leckron indicated that they partner with land
banks and help those living in blighted areas. She discussed the related public
safety issues and agreed that land banks can be helpful in encouraging new
development, which causes economic growth. She added that Habitat for Humanity
of Indiana uses subcontractors and creates jobs. They provided a handout titled
Land Banks: A Tool for Community Economic Development (Exhibit F).
Andrew
Berger, General Counsel, Association of Indiana Counties, told the Commission
that the current tax sale process is working, that cities can now use an expedited
process for vacant and abandoned properties, and that the surplus tax sale
property system is also working fine. He suggested that surplus properties not
sold could possibly go to a land bank. He said that the Association disagrees
with diverting resources now going to local units to a land bank system.
Dax
Denton and Tom Dinwiddie, representing the Indiana Bankers Association, discussed
the process for selling mortgage foreclosed properties. They voiced support for
tools to address vacant and abandoned properties. They said that better notice
to lenders is needed for tax sale properties because a notice to the lender
after the tax sale is inefficient. They suggested that the tax sale could occur
later in the process so that it could be a sale of the real
estate and not a sale of a certificate because the only incentive for a
certificate buyer is the statutory interest that can be earned if it is
redeemed.
Tom
Havens, representing the Indiana Builders Association, said the Association
supports the policy of land banks but does not fully support the proposal
suggested by Rep. Clere. He added that land banks have to bring property up to
building code standards and there are costs associated with doing so. He
discussed properties that will not sell, leasing of properties and below market
rental rates, and local property inspection programs, which do not exist in all
counties.
Jim Kelly,
Professor at Notre Dame University, who has expertise in land planning,
summarized a study of abandoned properties in South Bend, Indiana. He said
abandoned properties cost local government and neighborhoods each day. He
suggested that better coordination among interested parties is needed to
address the abandoned property issue. He agreed with previous speakers that the
tax sale auction process does not work well for these properties. He stated
that a land bank should be given powers to better deal with these properties. Mr. Kelley
provided the Commission with a letter from South Bend Mayor Pete Buttigieg
(Exhibit G).
Rhonda
Cook, General Counsel, Indiana Association of Cities and Towns, said that
vacant and abandoned properties are a problem for cities and towns. She
supports land banks as a helpful tool for cities and towns. She added that
third class cities and towns should be included in any legislation.
Supplier Pricing of Retail
Products
Gus Olympidis, owner of60 northern Indiana convenience stores named
Family Express, summarized a legislative proposal to bring about fairness to
retail consumers and counter unfair pricing by some suppliers of retail
products. He explained how suppliers categorize their customers into classes,
or channels, of trade and set wholesale prices according to these categories.
He said that promotions should be available to all retailers at the same
wholesale price, with differences based only on quantity and delivery factors.
Mr. Olympidis distributed the results of a survey of northwest Indiana retail
prices for Doritos® (Exhibit H).
In
response to Sen. Charbonneau, Mr. Olympidis said that a retailer will not get
the best deal just by being a quantity buyer because of the class of trade
categories. He added that certain wholesalers with brand name products can set
a wholesale price at their discretion, unlike gasoline where the price is set
using a commodity computation.
Don
Goodin, of Good Oil and a third generation owner of convenience stores that
serve small communities, stated that he can buy some products at retail in a
single case cheaper than a half truck from his supplier because of the different
trade channels. He indicated that a supplier will cancel all products if you
exclude some.
Jay
Ricker, an owner of 50 convenience stores who has been in business since 1979,
testified that he, too, can buy certain products at retail from a
"wholesale store" cheaper than he can buy the same product from his
supplier. He added that a supplier will even retaliate against the wholesale
store if they learn of a retailer buying from such a store. Mr. Ricker provided
a redacted copy of an email regarding Rickers Stores (Exhibit I).
Frank
Davoli, representing Richmond Master, which is a distributor to convenience
stores, agreed with the retailers' comments. He noted that some of the
communities served by these retailers are "food deserts" and these
pricing policies are unfair to consumers in these markets.
Joe
Lackey, representing the Grocery and Convenience Store Association, agreed that
a problem exists and that it also applies to smaller grocery stores, which are
in a different trade channel than a convenience store. He described the
wholesale/retail grocery product marketplace, noting that the bargaining power
of some suppliers is considerable for certain products. He added that soft
drink suppliers, for example, have geographic territories and there is no
longer a local soft drink bottler in many places so effectively there is no
competition for certain name brands.
In
response to Sen. Hershman's question about the bargaining power of a quantity
purchaser, Mr Lackey responded that the classes of trade drive the pricing and
the major nationwide retailers drive the retail price with nationwide deals so
quantity purchasing by a local retailer does not provide bargaining power on
the wholesale price.
Chip Garver, representing the Beverage Association, described the
channel of trade system. Sen. Hershman asked how channels of trade are
determined, and Mr. Garver said that manufacturers spend a considerable amount
of time and money on market research and determine channels of trade based on
this research. He said that a manufacturer knows what products and sizes sell
in each channel. He added that manufacturers provide discounts to all channels.
He opposed the proposal in HB 1367-2013, saying it would
directly contravene federal anti-trust laws and a court ruling by the 7th
Circuit Court of Appeals on pricing, would raise prices across
all channels, and would be costly to enforce since prices for many products
would have to be monitored on a daily basis.
Commission
members commented that there appears to be unfairness, that manufacturers
behave as if they know what is best for a retailer, and that these practices
erode confidence in the marketplace.
Ed
Roberts, representing the Indiana Manufacturers Association, said that the
Association has members that are manufacturers, distributors, and transporters.
The Association opposes the proposal because it has the effect of the government
setting prices. He explained that there are a number of reasons why prices are
different and that various arrangements are made with retailers.
Final
Report
Sen.
Hershman announced that the Commission would not be making any formal findings
or recommendations and informed the members that he would finalize with staff
an informational report summarizing the Commission's work during 2013.
Sen. Hershman adjourned the meeting at
4:30 p.m.
