City budget and Elected Officials and City Government and Local Government and Greg Ballard and Government & Economic Development and Government

Ballard again targets homestead credit in latest budget proposal

August 16, 2013
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Mayor Greg Ballard will introduce a $1 billion budget for 2014 Monday night that chops the Marion County Sheriff’s spending and once again hinges on a complicated reshuffling of tax revenue.

Ballard’s administration is counting on the City-County Council to boost revenue by $11.5 million by eliminating the homestead property-tax credit, which is an income tax-supported subsidy that benefits some homeowners. (It’s different than the much larger homestead deduction.)

With three Republicans joining the Democratic majority, the council voted 18-11 on July 29 against a phased-in homestead credit elimination. Last year, council leaders rejected a similar proposal that was part of Ballard’s 2013 budget.

Council President Maggie Lewis, a Democrat, said she agreed to sponsor the proposal this time, but she’s not personally sold on it. “It’s budget time, and everything should be on the table,” she said.

Lewis said she also wants to look at one-time measures, such as tapping tax-increment finance revenue, an $80 million fiscal stability fund that helps the city maintain its AAA credit rating, or unspent Rebuild Indy money.

Ballard’s team anticipated a $55 million gap between revenue and spending for 2014. They caught an $8 million break because health insurance premiums stayed flat, and they’re looking for $32.5 million more in spending cuts and new revenue sources.

The rest of the gap would be covered by spending down $25 million of the current general-fund balance.

The proposed cuts are as follows:

— Not funding police and firefighter raises scheduled to take effect in 2014: $5.7 million

— Marion County Sheriff’s Office: $5.4 million

— Marion County Courts: $1 million

— Indianapolis Fire Department: $1 million.

Additional revenue would come from these sources:

— Eliminating the local homestead tax credit, along with expanding the Indianapolis Metropolitan Police Department property-tax district: $11.5 million

— Charging police and firefighters fees for personal use of their take-home cars: $1.4 million.

Lewis, who was briefed on the budget this week, said she’s concerned about the impact on cops, courts and the sheriff.

She thinks the administration should give police and firefighters their raises. “They signed that contract. I think they should honor that contract.”

Firefighters wouldn’t face layoffs as a result of the department’s budget cut. Chief of Staff Ryan Vaughn said the city will spend the next year studying opportunities for station consolidation, but there will be no layoffs. IFD has an incoming recruit class, which is expected to make up for retirements and reduce overtime expenses.

The deepest cut would fall on the sheriff’s office, an ongoing source of frustration for Ballard. Sheriff John Layton’s budget would go from $111.5 million this year to $108 million.

That includes $2 million that's earmarked for debt service on an emergency communications system, so unless the council finds a way to restore his funding, Layton faces about $5 million in cuts elsewhere. He couldn’t be reached for comment Friday, when Vaughn and Controller Jason Dudich presented an overview of the budget to IBJ.

In an interview Thursday, Ballard said he’s not concerned about the impact of budget cuts. “If people manage appropriately, you won’t see any drop in services,” he said.

The council is scheduled to vote on the budget Oct. 14. “I don’t think they’re going to try to play games with it like they did last year,” Ballard said.

Vaughn acknowledged, though, that he has no idea how the council will react to his third crack at eliminating the homestead credit.

The impact on homeowners ranges from zero for those whose bills are already at the constitutionally mandated 1-percent cap to more than $70, especially in parts of Washington Township. The impact varies in both Democratic and Republican council districts.

Vaughn thinks eliminating the homestead credit makes the county’s tax burden fairer because currently, anyone who pays income taxes but doesn’t own a home sees no benefit. “It’s literally paying my property-tax bill in Washington Township,” he said.

Eliminating the credit would generate $11.5 million in income tax if it’s coupled with an expansion of the IMPD taxing district. The district currently covers the old city limits, but Ballard’s administration is proposing to expand it to the entire county, except Lawrence, Beech Grove, Speedway and Southport.

The current IMPD property-tax levy, $35 million, would apply to a broader base, lowering the tax rate from 36.5 cents per $100 of assessed valuation inside the current district to 11.4 cents per $100. Whether homeowners inside the current district see their bills decline and those in the expanded area see bills rise will depend on whether they've already hit the 1-percent cap, Dudich said.

For the city, expanding the district lessens the impact of property-tax caps and would generate another $3 million a year, Dudich said. Other entities inside the old city limits, especially Indianapolis Public Schools, would see the same benefit, he said.

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