Gary granted $23.5M in tax-cap relief-WEB ONLY

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A property tax appeals board granted the
city of Gary
and four of its sister government units $23.5 million in budget relief from new
state property tax caps yesterday.

But the decision by the Distressed Unit Appeals Board still means the city, its
sanitary and storm water districts, its bus agency and the Gary/Chicago
International Airport will still have to cut $11.25 million collectively from
their budgets by year’s end.

“It could have been better, it could
have been worse,” said Gary Mayor Rudy Clay.

Clay has said that he has cut $30 million in spending since taking office in
2006. But City Controller Celita Green said after yesterday’s meeting that the
city will have to cut another $7 million from this year’s budget, and the
sister government units about $4 million.

Clay said there would have to be layoffs, but he and Green did not yet know how
many. Clay said there would not be any police or firefighter layoffs, but some
vacant positions would not be filled.

Under a law passed in 2008, property tax bills on Indiana homeowners are capped this year at
1.5 percent of their home’s assessed value, with 2.5-percent caps for rental
property and 3.5-percent caps for business property. The caps are scheduled to
drop next year to 1 percent, 2 percent and 3 percent, respectively.

Although the caps are projected to save property taxpayers hundreds of millions
of dollars, it is money that government units will not get.

The distressed unit board was established to receive petitions from government
units that are expected to have a reduction in their property-tax collections
of at least 5 percent in a calendar year as a result of the caps. Gary was the only
municipality to seek relief from the board this year.

The caps were projected to reduce Gary‘s
property tax budget by about $30 million this year, about half of its
property-tax collections. The city and the four sister government units had
asked the distressed unit board for $35 million in relief by either raising
caps on homeowners, landlords and businesses, or just on businesses.

The board decided to set the caps for those government units this year at 2
percent for homeowners, or $2,000 for a home assessed at $100,000 – the same
limit in place last year. The caps on rental property were set at 3.27 percent
of assessed value and for business property at 4.55 percent of assessed value.

The changes will result in about $23.5 million in budget relief.

A report from the distressed unit board said that until recently, spending in Gary had not been
restrained. It also said that property taxes levied on a weak tax base have
experienced poor collection rates.

“The result has been the consumption of other revenues to the point of
exhausting cash balances, not paying bills, incurring internal loans for
inordinate periods of time, and now drawing from the current year budget to
balance the previous year,” the report said.

It said the trends had started long before Clay’s administration, and since
2008, actions have been taken to reduce staff and eliminate funded vacant
positions, among other things.

Under the plan approved yesterday, the city must hire a private firm to help
oversee further cost-cutting measures.

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