MEMORANDUM
TO: All County Councils and County Auditors
FROM: Micah G. Vincent, Commissioner
RE: Pilot Program for More Thorough Non-Binding Review of Budgets
DATE: May 5, 2014
Introduction
On May 11, 2013, Governor Mike Pence signed into law Senate Enrolled Act 517 (“SEA 517”). Section 8 introduced a new statute providing for a pilot program to allow county fiscal bodies of designated counties to carry out a more thorough non-binding review of the proposed budgets, property tax rates, and property tax levies of all taxing units in those counties. This new statute took effect July 1, 2013 and expires January 1, 2017. Please note that this memorandum is intended to be an informative bulletin; it is not a substitute for reading the law.
Purpose
According to IC 6-1.1-17-3.7, the General Assembly finds that, because of the enactment of property tax credits under IC 6-1.1-20.6, there is an even greater need for taxing units to cooperate in the adoption of their budgets, property tax rates, and property tax levies. The Department of Local Government Finance (“DLGF”) may establish a pilot program concerning non-binding review of budgets, property tax rates, and property tax levies. The role of the DLGF in the pilot program is to develop the framework for the continuation of a more thorough non-binding review in all counties without the direct involvement of the DLGF.
Becoming a Pilot County
For a county to be eligible for designation as a pilot county participating in the pilot program:
(1) the county fiscal body must adopt a resolution approving the submission of an application to be designated as a pilot county; and
(2) the county fiscal body must submit to the DLGF before June 3, 2014:
(A) an application using the attached template; and
(B) a copy of the resolution.
After reviewing the applications, the DLGF may designate not more than three counties that submit an application as pilot counties. In determining which counties are designated as pilot counties, the DLGF must attempt to achieve diversity among designated counties based on:
(1) the geographical location of the counties;
(2) the population of the counties; and
(3) whether the counties are primarily rural or urban.
The DLGF must notify each taxing unit in a pilot county of:
(1) the designation of the county as a pilot county; and
(2) the duties of the taxing unit.
The DLGF will provide this notification on or before July 1, 2014.
PLEASE NOTE: The DLGF emphasizes that the deadline for certifying net assessed values is August 1. The DLGF may be unable to provide the most accurate review possible for those pilot counties that fail to timely certify their net assessed values. The DLGF encourages those counties unsure about their ability to meet the deadline to consider this before applying.
Budget Review and Adoption Procedures; DLGF Analysis
The following apply in 2014 and thereafter:
Each taxing unit in a pilot county must, before September 2 of each year, file with the DLGF(via e-mail to PilotProgram@dlgf.in.gov) and with the county fiscal body:
(A) the taxing unit’s proposed budgets, property tax rates, and property tax levies for the following calendar year (the levies should be the proposed actual levies, not the proposed levies used for advertising purposes);
(B) a statement of whether:
(i) a petition and remonstrance process has been initiated under IC 6-1.1-20 concerning a controlled project of the taxing unit;
(ii) a public question under IC 6-1.1-20 concerning a controlled project of the taxing unit has been certified and will be on the election ballot;
(iii) a referendum tax levy question under IC 20-46-1 has been certified and will be on the election ballot; or
(iv) the taxing unit anticipates that it will during the following 18 months either adopt a resolution or ordinance under IC 6-1.1-20 making a preliminary determination to issue bonds or enter into a lease concerning a controlled project of the taxing unit, or adopt a resolution under IC 20-46-1 to place a referendum tax levy question on the election ballot; and
(C) any additional information required by the DLGF to prepare an analysis of the proposed budgets, property tax rates, and property tax levies submitted by taxing units in each pilot county (see the attached checklist).
(A school corporation providing information to the DLGF must provide the information through Gateway. Specifically, the DLGF will collect the proposed budget, levy, and rate information using the county council review form on Gateway to satisfy this requirement. All other documents can be e-mailed to PilotProgram@dlgf.in.gov.)
The DLGF may follow up with a taxing unit to request additional information, if necessary.
A taxing unit in a pilot county that would otherwise be required to submit its proposed budgets, property tax rates, and property tax levies for non-binding review under IC 6-1.1-17-3.5 is not required to do so, but the taxing unit must instead submit the information required by (A) through (C) above to the DLGF and county fiscal body.
A taxing unit that is located in a pilot county and that is subject to binding review and approval of the taxing unit’s budgets, property tax rates, and property tax levies under IC 6-1.1-17-20 or IC 36-3-6-9:
(A) remains subject to binding review and approval under those statutes and must submit the information required under those statutes to the appropriate fiscal body; and
(B) must also submit the information required by (A) through (C) above to the DLGF.
The DLGF must prepare an analysis of the proposed budgets, property tax rates, and property tax levies submitted by taxing units in each pilot county. The DLGF may establish appropriate procedures and conduct the appropriate analysis that meets the DLGF’s requirements for the review of a unit’s budget. The analysis prepared by the DLGF must include at least the following:
(A) The estimated total property tax rate for each taxing district in the pilot county.
(B) The estimated total amount of property taxes to be levied in the pilot county.
(C) The estimated consequences of the property tax credits under IC 6-1.1-20.6 on:
(i) the property tax rates of each taxing unit and taxing district in the pilot county;
(ii) the expected total tax rate of each taxing district in the county; and
(iii) the property taxes that will be collected by each taxing unit in the pilot county.
The DLGF must, before October 2 of each year, provide this analysis to the county fiscal body of the pilot county and to the fiscal body of each taxing unit in the pilot county. Upon request by the county fiscal body, representatives of the DLGF must appear before the county fiscal body to review the analysis.
The county fiscal body of a pilot county must, on or before October 15 of each year:
(A) review the proposed budgets, property tax rates, and property tax levies of each taxing unit in the pilot county;
(B) review the expected total tax rate of each taxing district in the county; and
(C) issue a non-binding recommendation to each taxing unit in the pilot county regarding the taxing unit’s proposed budgets, property tax rates, and property tax levies.
These review and recommendation requirements may be carried out by the full county fiscal body or by a committee appointed by the county fiscal body for that purpose.
A recommendation by a county fiscal body must include a comparison of any increase in a taxing unit’s budgets, property tax rates, and property tax levies to:
(A) the average increase in Indiana nonfarm personal income for the preceding six calendar years and the average increase in nonfarm personal income for the county for the preceding six calendar years; and
(B) increases in the budgets, property tax rates, and property tax levies of other taxing units in the county.
After review, a taxing unit must adopt its budget, property tax rates, and property tax levies by thedate required under IC 6-1.1-17-5. PLEASE NOTE: Taxing units cannot adopt their budgets, rates, and levies until the county fiscal body has issued its non-binding recommendations. Again, the deadline for the county fiscal body to issue its recommendations is October 15 and the deadline for taxing units to adopt their budgets, rates, and levies is still November 1 (because November 1, 2014 falls on a Saturday, the deadline becomes the next business day, November 3).
Discontinuation of Designation as Pilot County
The county fiscal body of a pilot county may, before July 1 of a year, adopt a resolution discontinuing the county’s participation in the pilot program. If a county fiscal body adopts such a resolution:
(1) the county fiscal body must certify a copy of the resolution to the DLGF;
(2) the county’s participation in the pilot program is terminated; and
(3) the DLGF must attempt to replace the pilot county with another county that has applied to be designated as a pilot county.
DLGF’s Reporting Obligations
The DLGF must, before November 1, 2014 and each year thereafter, report to the commission on state tax and financing policy concerning the pilot program and whether the non-binding review under the pilot program is fostering cooperation among taxing units in the adoption of their budgets, property tax rates, and property tax levies.
**IMPORTANT NOTES**
1) The taxing units and county fiscal body of each pilot county must satisfy the requirements listed above in addition to the advertising provisions under IC 6-1.1-17-3. Taxing units in pilot counties already subject to non-binding review must comply with the requirements above instead of those prescribed by IC 6-1.1-17-3.5. Pilot county taxing units subject to binding adoption must still perform the obligations under IC 6-1.1-17-20 (or IC 36-3-6-9, as applicable). In other words, units subject to binding adoption must satisfy both IC 6-1.1-17-3.7 (pilot program review) and IC 6-1.1-17-20 (or IC 36-3-6-9, as applicable) (binding adoption processes). Although county fiscal bodies normally do not submit their budget information for non-binding review, the fiscal body of each pilot county must submit the county’s budget information to the DLGF as explained above. Cross-county units falling partly within a pilot county should be aware that they are subject to the pilot program requirements in IC 6-1.1-17-3.7.
2) When formulating the taxing unit’s estimated budget, property tax rate, and property tax levy under IC 6-1.1-17-3, the proper officers of the taxing unit must consider the estimated consequences of the property tax credits under IC 6-1.1-20.6 on the property taxes that will be collected by the taxing unit and the calculation of fund balances. In other words, while taxing units cannot inflate their levies to offset circuit breaker losses, they should be aware that the circuit breaker credits will reduce the amount of revenue available to them.
3) In order to provide the best possible analysis, the Department requests that units submit budget, levy and tax rate information that closely reflects what they believe will be their actual certified budget order. Inflation of property tax levy or rate data may result in inaccurate analysis and reduce the usefulness of the pilot program.
Summary of Timeline
June 2, 2014: Last day for county fiscal body to submit application and resolution to DLGF.
June 30, 2014: Last day for DLGF to notify each taxing unit in a county DLGF enrolls in pilot program.
August 1, 2014: Last day for counties to certify net assessed values.
September 2, 2014: Last day for taxing units to submit budget information to county fiscal body and DLGF.
October 1, 2014: Last day for DLGF to provide analysis to pilot counties.
October 15, 2014: Last day for pilot county fiscal body to issue non-binding review and recommendations.
November 3, 2014: Last day for all taxing units to adopt their budgets, rates, and levies for 2015.
June 30, 2015: Last day for county fiscal body to adopt and certify withdrawal resolution to DLGF.
