UPDATE: Group pushing for constitutional property tax cap

Indiana Gov. Mitch Daniels joined homeowners, lobbying groups and others on Wednesday to promote a statewide ballot measure that would place property tax caps into the state constitution.

They noted that constitutional limits on property tax bills would make it harder for judges or state lawmakers to undo the caps. Proponents also said the limits would bring more predictability to a system that produced huge increases for many homeowners a few years ago.

"What started as a genuine grassroots movement must be finished in that fashion," Daniels said while visiting the Beech Grove home of Denise Pellow-Douglas and her husband, Randy Douglas.

Opponents of the caps, including the Indiana Urban Schools Association, argued that the limits hurt the ability of local governments and schools to raise money and deliver services.

The General Assembly passed a law in 2008 that generally limits property tax bills to 1 percent of homes' assessed value, with 2-percent caps on farmland and rental property and 3-percent limits on business property.

A simple majority vote in the upcoming election would place the caps in the state constitution. The proposed amendment twice cleared the General Assembly, which made it eligible for a statewide vote.

Daniels said the caps have cut homeowners' tax bills by about 30 percent. The nonpartisan Legislative Services Agency projected that the caps would save property owners about $465 million this year, but leave counties, cities, other local governments and schools without the money.

There are some exceptions. There are different caps in Lake and St. Joseph counties, and local voters can approve referendums to exceed the limits for construction projects or increased operating spending by school districts.

The constitutional amendment was favored by 64 percent of Indiana residents surveyed in December by Ball State University's Bowen Center for Public Affairs.

A coalition calling itself the Hoosier Property Tax Reform Alliance plans a media campaign to push for passage of the amendment. The group includes the Indiana Association of Realtors, Indiana Builders Association, Indiana Manufacturers Association and the Indiana Apartment Association.

Paul Wyman, the Indiana Association of Realtors' former president, noted that property tax bills for many homeowners went up 100 percent or more in 2007. That followed an overhaul to the system so assessed value was based more closely on the price that property fetches on the market.

Wyman said the high bills forced some homeowners to give up more than just wants.

"For some families it was truly about giving up their needs," Wyman said.

The bill for the Douglas family, whose moderate brick and wood house the governor visited on Wednesday, was $1,663 in 2007. This year, it's $1,167.

"Property tax caps let us know what to expect, which is a must when you're raising two sons like Randy and I are, and one of them is in college," Denise Pellow-Douglas said.

Voters in the Beech Grove Schools district approved a referendum in 2009 that allowed property tax bills to exceed the statutory caps this year.

Tom Keeley, business manager for the district, said it would have been forced to scrap busing this year had voters not approved the local referendum. Even with its passage, the district is projected to take in about $500,000 to $750,000 less next year than it would have gotten without the caps.

"We were able to pay our bills this year, but I anticipate having some serious problems to continue the services we have in 2011 and 2012," Keeley said. "It's a very serious challenge for government units, no doubt."