From the Fort Wayne Journal-Gazette:
Allen County residents will pay more in income taxes starting Oct. 1.
Fort Wayne City Council members Tuesday approved increasing the local option income tax from 1 percent to 1.35 percent, a move they said was necessary to pay for critical gaps in police, fire, parks and roads.
The measure designates 0.25 percent for property tax relief, which will add a new credit to every property owner's tax bill, and 0.10 percent to public safety, which will send new revenue to every taxing body in the county that provides public safety, including the city, county and some towns and townships. The property tax relief portion will also, thanks to complicated tax calculations, result in more property tax revenue for entities such as schools and the library.
The council also gave approval to a new property tax called a Cumulative Capital Development Fund, expected to raise about $800,000 next year and up to $2.1 million in future years.
Mayor Tom Henry praised the measure, which was a compromise from one his administration pushed to close an expected budget gap for 2014. He said the new revenue will not only sustain the city but position it for success.
"Fort Wayne City Council tonight voted favorably on one of the most important initiatives in the history of the city of Fort Wayne," Henry said in a written statement. "By investing in ourselves, we're saying we're committed to a great quality of life, tremendous neighborhoods, new jobs, and business growth."
The tax increases each passed 6-2. Voting against the increases were Mitch Harper, R-4th, and Russ Jehl, R-2nd. Marty Bender, R-at large, was absent, but John Crawford, R-at large, said he had spoken to Bender, who was celebrating his daughter's wedding, and that Bender said he supported the income tax proposal and would have voted for it if present.
Crawford, who shepherded the proposal through months of discussion – which included increasing the city's property taxes to the maximum allowed – said the package is not really a tax hike.
"This is not a huge tax increase, it's catching up to what we lost," Crawford said, citing the property tax caps imposed in 2009. "Just because we decreased property tax revenues doesn't mean the cost of running the city went down."
The city has lost $53 million in revenue since the caps were put in the state constitution and is expected to lose $20 million more next year. The package approved increases revenue about $13.5 million.
In addition to the lost revenue, officials said, the city is behind in areas critical to the quality of life:
•Declining fuel tax money has meant the city has put off fixing roads for years, leading to a $60 million backlog of roadwork that needs to be done.
•Budget cuts have depleted the ranks of the police and fire departments, with each one short dozens. They need $2.8 million to hold academy classes and begin hiring again.
•The parks department doesn't have enough money to maintain its facilities and needs about $3 million more a year.
Crawford said months of studying city finances had convinced him that without the tax hikes, drastic cuts would be required that would harm the city, hurting economic development and lowering property values.
County income taxes are determined by the Allen County Income Tax Council, where the city of Fort Wayne holds more than 70 percent of the votes and thus decides for everyone. Collection of the tax begins Oct. 1, and the revenue will begin flowing to taxing bodies with public safety functions on Jan. 1.
Harper said he is most concerned that the increased revenues will increase the temptation for the city to borrow. One of the arguments in favor of the tax hikes was that the city needs to stop its cycle of borrow and spend.
"We haven't seen pay-as-you-go up to now," Harper said. "We have no history of that."
The plan Harper and Jehl proposed did not increase income taxes but did raise current property taxes the same as the approved plan and also called for $6 million in new borrowing to ease cash flow until revenues improved.
After the income tax was approved, Jehl and Crawford co-sponsored a nonbinding resolution seeking to guide how community economic development income tax money is spent.
The mayor controls CEDIT funds, but the resolution calls for them to be used for priorities such as roads and parks as more CEDIT money is freed up by the new revenue and repaid debt. Crawford called it a "gentlemen's agreement" that since the council entrusted the administration with more money, it needs to agree to use it for the priorities all sides agreed upon during the discussions. That measure passed unanimously.
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