Tweaks lowering property taxes face opposition from local governments, schools

  • Comments
  • Print
Listen to this story

Subscriber Benefit

As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe Now
This audio file is brought to you by
Loading audio file, please wait.
  • 0.25
  • 0.50
  • 0.75
  • 1.00
  • 1.25
  • 1.50
  • 1.75
  • 2.00

Growing numbers of Indiana communities have sought property tax levies beyond their traditional caps thanks to rising property values. But lawmakers want to make it more difficult.

To make a maximum levy appeal based on three-year assessed value growth—the most common appeal type—the growth must exceed a statewide average growth quotient by at least 2%. New legislation would raise that that to 4%, drawing opposition from multiple local units of government Tuesday.

House Bill 1120 would further tackle high property taxes by extending a cap on school operating referendum levies, forcing districts with certain debt service rates to put big projects on the ballot and mandating lower values for large homesteads.

“I understand we’re trying to balance two important things: taxpayer relief and local control,” said Oliver Barie, a lobbyist representing a group of northeast Indiana public schools. But schools, he said, stand to lose millions of dollars they’d otherwise receive.

The Senate Tax and Fiscal Policy Committee heard about 90 minutes of discussion on the bill but didn’t vote on it. Rep. Jeff Thompson, R-Lizton, indicated some provisions weren’t yet finalized.

Indiana restricts how much money local units of government can collect in property taxes. But they can also appeal their maximum levies for a list of reasons, including unexpected growth in assessed value.

Dozens of local taxing units—from libraries and townships to cities and counties—submitted 95 requests to review their maximum levies last year, according to Department of Local Government, or DLGF, records obtained by the Capital Chronicle. About 80% were based on assessed value growth.

DLGF partially or wholly approved 84 of the requests, allowing those units to collect $40 million more from their taxpayers.

Thompson, however, said he hoped to cut the number of units eligible for the growth appeals in “half” through his legislation.

“I’m trying to at least push back on some of that,” he added.

David Potter, a Republican member of the Danville Town Council, said the proposal would “handicap” the town’s ability to “meet a growing demand for services.”

He said that just 11% of the town’s assessed value pays a “full rate” because some is tax-exempt and the rest hits the constitutional tax caps. The town made an appeal last year to bulk up its public safety services, but he said he’s worried about the future.

Accelerate Indiana Municipalities’ Jenna Bentley described the current limit as a “high bar for most to meet” and emphasized that qualifying for an appeal doesn’t guarantee DLGF will approve one. Local units must back up their requests with extensive evidence of need.

Lawmakers take aim at school operating referendum levies

Assessed value growth also increases the amount of money school corporations collect through their operating referendum levies — and the amount taxpayers cough up. The levies are outside the tax caps.

Thompson hopes to extend a one-year cap on growth in levies approved before 2023. His bill would make the 3% growth cap permanent and add a growth factor.

Schools came out in force on Tuesday, with Barie remarking that growing, stable and shrinking institutions would all “still lose.”

A fiscal analysis shows the proposal would affect 52 school corporations operating under pre-2023 levies. They’d collect $35.2 million less than expected in 2025 and $54 million less in 2026. The losses would continue until the levies expire.

Barie said the measure would create a “seemingly arbitrary inequity” among school corporations because corporations passing referenda beginning this year wouldn’t be subject to the cap.

Brian Tomamichel, assistant operations superintendent at Westfield Washington Schools, said the district lost $2 million in the cap’s first year and expects to lose $13.9 million over the life of a levy voters renewed two years ago—despite being a “fast-growing” district.

Those voters, he said, knew what they’d get out of the levy: welding, Junior Reserve Officer Training Corps courses, an orchestra and more.

“Currently, all those programs are placed on hold until we can figure out how we’re going to fund them,” Tomamichel said. “Through this, we’re actually going back to our community and saying ‘Hey, we can’t meet what we promised you because of the restrictions that have been put on us.’”

Tony Cook, a former lawmaker speaking on behalf of a growing and suburban schools group, criticized state-level digs at locally approved tax measures.

“What are we trying to do? Save the voters from themselves?” he asked.

The Indiana Chamber of Commerce previously testified in support of the provision, arguing lawmakers should get to decide how to handle the “windfall” generated during major property tax increases. No supporters testified Tuesday, however.

School debt also discussed

The bill would additionally extend a previously temporary provision pushing political subdivisions, like schools, with higher debt service tax rates toward referenda.

If subdivisions have debt service rates greater than 40 cents per $100 of assessed value, any project that would be financed by bonds or a lease would be considered a “controlled project”—even if the cost doesn’t meet traditional thresholds.

The designation comes with additional steps like public hearings. Property owners or registered voters in debt-heavy subdivisions could also request a petition and remonstrance process or referendum.

If the rates exceed 80 cents per $100, subdivisions would be required to put the project on the ballot as a public question.

Scott Wyndham, the superintendent of the Avon Community School Corp., said the change would require the district to hold a referendum for every debt issuance moving forward.

The growing district, he said, has issued debt for school construction and maintenance even as it’s voluntarily lowered its tax rates.

“To spring this mandate on schools … would really put in place impossible expectations,” he said, given the school’s 20-year bonds.

Schools expert Denny Costerison, representing a variety of stakeholder groups, said his main issue with the cap and debt provisions is that last year’s legislation would’ve sunset both.

“As this bill is written, they become permanent tax policy,” he said.

He asked the committee to leave the issue to a two-year task force examining the state’s tax system and to act instead during a budget year. That prompted Rep. Travis Holdman, R-Markle—who is leading the task force—to confess nervousness at the number of witnesses turning to the body as a “relief valve.”

Other provisions

Another stab at lowering property taxes would force county assessors to at least halve the value of homesteads on big lots.

In Indiana, homestead “sites” of up to one acre are taxed at lower rates than additional acres. Those are considered “residential excess” acres.

House Bill 1120 would require assessors to reduce the base value of the land by at least 50%. Witnesses, however, were skeptical of the idea.

“It doesn’t really accomplish that that goal of giving relief,” Bartholomew County Assessor Ginny Whipple, a Republican, told the committee.

She said that’s because the state already requires assessors to value such land close to market value, so lowering the value of one part of the parcel would force an increase in another part.

Otherwise, Whipple said, DLGF won’t approve the values. In that scenario, a local unit of government wouldn’t be able to set a tax rate and wouldn’t be able to collect taxes.

“Don’t mess with the value. We assessors do value,” Whipple concluded. She suggested that lawmakers—“if they must” make the change—consider a net tax deduction instead.

Thompson’s legislation would also let disabled veterans with homes assessed at $240,000 or less qualify for a property tax deduction, up from the current $200,000 limits.

Veteran witnesses thanked lawmakers for the boost but cautioned they’d be back within years—like in the past—as property values continue to rise.

The Indiana Capital Chronicle is an independent, not-for-profit news organization that covers state government, policy and elections.

Please enable JavaScript to view this content.

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our comment policy that will govern how comments are moderated.

18 thoughts on “Tweaks lowering property taxes face opposition from local governments, schools

    1. Until you go to sell your property. If your assessed value and appraised value are too far out of whack, then it can start to spell trouble for some financing companies.

    2. Mark W., assessed value is determine by a government process for tax purposes. It is not used in calculating appraised value. Fair market value, which is used to determine the listing price, is based on the likely price offered by a willing buyer in a free and open market with no incentives or inducements. Prior to closing, the buyer’s lender will have the property appraised by comparing it to recent sales of nearby homes of similar size and condition. In rising markets, appraised prices go up. In declining markets, appraised prices go down. Interestingly, assessed values are based on recent sale prices as well. So assessments do go up when people pay more for their homes. And they go down when people pay less. Bottom line: the market first dictates sale prices, which in turn then influence assessed values. A classic case of cause-and-effect.

    3. Under Indiana Supreme Court decisions, assessed value is supposed to represent fair market value even in the absence of a sale, Brent. That’s why AV’s have risen dramatically in many places since 2020.

    4. Chris B., even though your home hasn’t sold there are likely other homes not far from you that are similar in size, condition, and amenities and have sold. They are called “comps” (comparable properties), and provide the assumed market value of your home. What distorts the actual “fair market value” in assessments is the tax cap law. You can see how much of a distortion it is by looking at tax record for a house that sold two years ago for X price, but is assessed for tax prices at significantly lower valuations. This is true for homes as well as commercial properties. The tax cap law is responsible for under-funding our schools, police and fire departments, street maintenance, and more.

    1. Yes, how dare we let voters make the choice to pay more in taxes because they’d like better government services! We should continue to let our legislators from parts of Indiana that are dying off … drive policy for the portions of Indiana that are growing and attracting others.

      Maybe a lot of legislators push policies like this because they are jealous they live in dying parts of Indiana. Or maybe they just don’t think there’s a future for Indiana worth investing in.

    2. Voters in some parts of Indiana are smart enough to realize investing in schools makes sense.

      Look at Carmel or Center Grove or Avon or any number of suburban schools, where the residents of Indiana are relocating to.

      Legislators want to put a stop to voters making this choice. As usual, this makes no sense, in part because these legislators represent the parts of Indiana that aren’t seeing population growth.

    3. Dustin, this isn’t difficult. Legislators began demanding that school bond issues go to the referendum ballot. Now they’re unhappy when school district voters approve levies.

      We can’t let Republicans dictate property tax policy any more. That one-sided avenue has led to whiplash among local governmental units. No long-term thinking—just immediate demands for ‘tax relief.” It’s a complicated issue that demands serious answers. Thompson’s bill isn’t a serious answer. It’s knee-jerk.

  1. Just because someone is told their house is worth more doesn’t mean that person has more money as a result. As such, this “windfall of money” doesn’t really exist – It’s simply the government forcing more taxes onto homeowners.

    It’s not surprising to be hearing of an increase in older people having to move because they can no longer afford to live in their homes because of the increase property tax bills. People who have lived in their homes for years are having to move because the politicians see a windfall.

    1. Brad J., home ownership is a privilege, not a right.

      I know of many people who inherited their homes from their parents or grandparents. And I know many older, retired people who are living in the same homes since the 1970s. In both cases, because they don’t have a mortgage, they are not required to have homeowner insurance on the property, so they don’t have that expense. So the only real cost of home ownership for them is the property tax.

      I find it hard to believe that there is a significant number of people who can no longer afford to live in their homes because of the increase property tax bills. If so, they can sell and move into a rental apartment for maintenance-free living. There is no shame in renting.

  2. Education is paramount. It has to be, or should be.
    What happens when we experience another 2008. Will we reverse it. Use a bases that won’t be impacted by housing like today’s affordability. I admit I don’t have the answer. However I think if education has a priority, maybe the funds should come from a higher level.

  3. The purchase of a home is, for the vast majority of people, the largest expenditure they will ever make. Unfortunately, they view it as an expenditure rather than what it really is, an investment.

    Owning your own home is the best path to building wealth. That occurs when improvements are made to the property (enlarging it and/or renovating it). It also occurs when neighboring properties increase in value. Yes, it bumps up the tax bill. But over time it’s a small price to pay for the pay-off at the end when the hometown sells the property, cashing out to pay for assisted living, nursing care, or sharing with your family or a charitable organization with some of the fortune that you can’t take with you.

    Complaining about property taxes truly is looking at a gift horse in the mouth.

  4. As was stated previously, seniors are really hurting with these increases in taxes. Inflation is a very thorny issue and for people on fixed incomes, it is very problematic. I think seniors over age 70 should have their property taxes capped at a reasonable amount. What good does it do to live frugally all of your life and pay off debt including your house, and then homeowners insurance and property taxes soar and make your long-held home unaffordable? That is not right.

  5. School financing is always a big scam…..So if local financing for developments. Public Schools need to be educating a workforce not only sending people to college. Not everyone should go to college.
    The metrics of a successful school need to be different. Western Boone Schools should not be evaluated the same way as IPS or Anderson School Districts. Measuring a successful school generally starts with the family unit and structure, not in the classroom. We have made the public school systems a replacement for 2 parent families is the reason Carmel, Center Grove, and HSE are far mor successful than Pike Township and IPS. Throwing more money at schools doesn’t get better results , families do.

    1. We don’t throw money at families either. If we did, we’d prioritize the ability for households to make it on the salary of one wage earner, which is increasingly a pipe dream.

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news. ONLY $1/week Subscribe Now

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In

Get the best of Indiana business news.

Limited-time introductory offer for new subscribers

ONLY $1/week

Cancel anytime

Subscribe Now

Already a paid subscriber? Log In