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I am an accidental tourist in the land of government finance. The natives are friendly enough to me, but they seem to like one another less and less.
All I know about government budgets, tax increment finance, abatements, property tax caps and circuit breakers I learned as I was trying to do something else. For nearly two decades now, I have been discovering how our local government gets and spends its money.
Make no mistake about it, various units of government in Marion County are at war, with the aim to push as much burden from property tax caps and circuit breaker penalties onto someone else as possible.
A brief pause to translate. Each year, the units figure how much property tax revenue they want. You get billed for your share, but the tax caps limit how much you actually have to pay. The amount you don’t have to pay is the circuit-breaker penalty.
The 800-pound gorilla is, of course, the city of Indianapolis. Because it alone has authority to enact changes affecting financial resources, it is best equipped to wage this war.
For instance, the city recently enlarged the police taxing district from the old city limits to the entire county. The sole reason was to reduce the city’s circuit-breaker penalty by $3 million. The move simultaneously saved Indianapolis Public Schools $6 million, but cost township schools and those townships with their own fire service an additional $4 million.
The quest to eliminate the local homestead credit serves the same purpose. It would save the city $8 million while pushing $5 million in circuit breakers out to the schools and some municipal corporations.
The city has additional ways it affects the finances of the other units. It can unilaterally create TIF districts and grant abatements, both of which sequester property value away from all taxing units, raise tax rates and increase circuit-breaker penalties.
Lately, when it creates a new TIF, the city carves out the 2-percent and 3-percent tax cap properties, leaving behind the 1-percent parcels. They say they are protecting homeowners from the TIF. In reality, they are enriching the TIF districts with high-revenue property while enriching school districts with low-revenue property.
Even with routine functions, the city has an edge. When crafting the annual budget, the city and library use a tool unavailable to the others; they pad the levy with the exact amount they expect to lose from the circuit breakers. This one tool may be the primary reason the city has maintained level property tax revenues since the tax caps were instituted.
In this war, only school districts have been able to push back at the city. Last year, several districts doubled their debt-service budget in order to fatten their year-end balance, a one-time option. This cost the city $10 million in additional circuit-breaker penalties.
Proverbial 40-pound weaklings, township governments—especially those with fire service—have no good way to fend off actions of the other units and fewer means to absorb circuit-breaker penalties. The higher the tax rate, the harder they have it.
Nobody would deliberately design the form of government we have in Indianapolis. Each unit has a different dependence on property taxes and differing abilities to compensate for the circuit breakers. There is no unity in Unigov.
And right now, the natives in government finance land are all restless.•
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Andrews is vice president of the Decatur Township Civic Council and leads its land use committee. She blogs about good government at HadEnoughIndy.com. Send comments to ibjedit@ibj.com.
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