Monday, July 14, 2014

Vandenack: Recession and Tax Caps Continue to Chip Away at Property Tax Funding in Elkhart County

By Tim Vandenack in the Elkhart Truth:

Jobs weren’t the only casualties of the recession that clobbered Elkhart County and much of the rest of the nation.

Limits went into effect in Indiana in 2009 on how much homeowners and others pay on property taxes and, compounded with the recession, turned a dip in funding into a giant plunge for schools, cities and other Elkhart County entities. Consequently, three school districts asked voters’ help through local tax increases

Property taxes are tied to the assessed valuation of homes, businesses and other property, as determined by the county assessor’s office. The down economy and the parallel hit to the real estate market pushed the assessed valuation of property down (see the sidebar to find out more about the tax caps). That, in combination with tax caps, resulted in reduced property tax funding.

The losses, at least of for the largest units, have gradually increased each year since the new tax caps were phased in starting in 2009. Since, there has been plenty of hand-wringing and debate among many elected leaders, faced with trimming and slashing operations as a result.

Five years after the end of the Great Recession, the situation doesn’t appear to be letting up. Officials worry the losses will mount in 2015. And it’s renewed on-and-off discussion among some leaders about creating a new local option income tax — basically hiking the income tax rate here to offset the shortfall.

"If we don’t get extra revenue, we’re going to have to start cutting some services,” Goshen Mayor Allan Kauffman said.

Most germane, perhaps, is the level of property tax funding actually received after factoring tax cap losses. Property tax funding is the single biggest source of revenue for many taxing entities.

Elkhart Community Schools, judging by that parameter, saw the biggest loss in dollar terms. The system generated $32.78 million in property taxes in 2009 and that fell to $28.07 million a year later — a decline of $4.71 million.

Cumulative losses due to caps to county government and the cities, towns, townships, library systems and schools in Elkhart County totaled $42.63 million in 2014, up from $2.58 million in 2009.