The Indianapolis City-County Council approved a budget Monday night that relies on a $15 million payment from a tax-exempt entity, likely setting the stage for a legal battle, plus difficult negotiations with Mayor Greg Ballard.
The council adopted its budget on an 18-11 vote with two Republicans, Christine Scales and Jason Holliday, voting with the Democratic majority. The council added the $15 million payment-in-lieu-of-taxes, or PILOT, to the Capital Improvement Board’s budget on a separate vote, which fell along party lines, 16-13.
Ballard’s office immediately issued a statement that questioned the Democratic majority’s fiscal responsibility.
"The council majority's current plan is unfunded, increases spending, more than doubles the deficit for 2014, and strips support of our downtown economy in order to give tax breaks to a select few,” the statement said.
Ballard has 10 days after receiving the budget to accept it, reject it, or employ his line-item veto. He and the council must reach agreement by Oct. 30.
Crime and a desire to hire more police officers and firefighters drove the council’s budget, and more than one Republican expressed sympathy with that cause. Scales, who represents a north-side district, said some of her constituents are so fearful that they’re putting their homes up for sale. She said she wanted to vote for the $15 million fee to the CIB but ultimately decided the legality was too questionable.
Jeff Miller, a Republican who represents near south-side neighborhoods, said he also wanted to make room in the budget for new police and firefighter hires, as well as raises that were supposed to take effect in 2013. “It’s just disappointing we didn’t make that mission No. 1, that I didn’t make that mission No. 1,” he said. “My residents were willing to pay more to fund that.”
Miller said he thought it was reasonable to ask the downtown Capital Improvement Board to chip in for public safety. But he and other Republican councilors said the city should also follow through on Ballard’s proposal to eliminate the homestead tax credit.
Democratic council leaders rejected that idea, which meant they needed to look elsewhere for $9 million in revenue. Council Vice President Brian Mahern came up with the idea of the PILOT fee, which would be enough to also hire 50 police and 30 firefighter recruits.
Mahern said his plan is the “very best attempt to address public safety issues” without putting the burden on taxpayers. He noted that the CIB, a municipal corporation that oversees Bankers Life Fieldhouse, Lucas Oil Stadium and the Indiana Convention Center, has paid $30 million over the past three years to the Indiana Pacers.
Mahern’s proposal set off a wave of resistance and criticism, from CIB-funded groups like VisitIndy to state Sen. Luke Kenley, who said it would jeopardize the legislature’s support for a mass-transit plan.
CIB officials argue that any PILOT for 2013 should have been assessed by March 1. They also say they can’t afford the $15 million because $52 million of their $67 million reserve fund is already earmarked for debt payments and building maintenance.
City Controller Jeff Spalding pushed for eliminating the homestead credit because it would raise baseline revenue, helping close a $65 million budget gap in 2013, as well as the deficit that’s forecast for 2014.
The homestead credit, which is distinct from the widely used homestead deduction, historically was used to offset homeowners’ tax bills through income-tax revenue. Since Indiana introduced caps on property taxes, however, the offset doesn’t affect all homeowners equally.
Councilor Ben Hunter pointed out that the credit mostly benefits owners of higher-value homes. “As a moderate Republican, I have a hard time with that,” he said.
Other action by the council:
— Reduced public works funding through RebuildIndy by $20 million to $67 million in the main budget. Republican members of the council’s public works committee voted against this provision and spoke out again Monday night, saying it would jeopardize federal matching grants and amount to micro-management of the Department of Public Works. Committee Chairman Vernon Brown, a Democrat, said he still wants to see the $20 million spent, but he wants to public works staff to update the council on its project list first.
— Cut $100,000 from the Indianapolis International Airport’s professional services budget. The budget cut was introduced by Republican Councilor Robert Lutz, who represents southwest-side neighborhoods. Lutz said he’s upset with airport officials for opposing a potential competitor, a park-and-fly enterprise, which would bring additional tax revenue to Decatur Township.