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Cap on Property Taxes a Balancing Act

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Posted by: Jeff Rea
President and CEO
South Bend Regional Chamber of Commerce on Wednesday, December 6, 2017 at 12:00:00 am

The Indiana General Assembly reacted to protests from voters over rising property tax bills and in 2008 placed property tax caps into law. The caps limit tax bills to 1 percent of the assessed value of homes, 2 percent for farms and rental properties and 3 percent for businesses.

In 2010, voters affirmed that action of the General Assembly by statewide referendum as 72 percent voted in favor of placing the caps into the Indiana Constitution.

The predicted result was homeowners, landlords and businesses would save significant money. Several years later, that has held true and Indiana has vaulted to the front of most business rankings, boasting the best business climate in the Midwest and one of the tops in the country. This is in large part because of the “certainty” that exists in the Indiana tax system.

At the same time, the action has left many state and local government units scrambling. Initial predictions were that there would be more than $500 million in annual savings to the taxpayers statewide, meaning fewer dollars available to governments for the delivery of essential services.

Many lawmakers felt local governments would consider consolidation options, including reducing the number of school or library districts and consolidating emergency dispatch services. Across Indiana, communities have been slow to follow that thinking with just few consolidations occurring.

In St. Joseph and Lake counties, an additional 10 years were granted for full property tax cap implementation to help the counties better deal with outstanding debt obligations. Still, 2017 estimates by the Department of Local Government Finance (DLGF) had $78 million in total savings to the taxpayers.

The City of South Bend, St. Joseph County, the City of Mishawaka, and the South Bend Community School Corporation were hit hardest. Other school corporations, libraries and public transportation agencies also saw major cuts in revenue. Those units are also bracing for more losses when full implementation comes in 2020.

I’m one who has benefited. My property taxes are now lower. But am I better off? The jury is still out on that one.

In St. Joseph County, no consolidations have occurred, and there doesn’t seem to be much appetite for that. Instead the level of services has or will be affected.

It seems daily in the news that taxpayers are wondering about police protection, leaf collection, street paving, soon snow plowing, park services, public transportation, 911 services, the number of students in a classroom, the number of schools in a system or school transportation. I could go on.

The cap of property taxes has a direct correlation to the delivery of each of those services. The same public, of which an overwhelming majority voted for tax caps, has been slow to embrace changes in service levels. It will only get more difficult in the coming years.

While our elected leaders are reducing service levels to meet current budget demands, they must also carefully balance the need to make our communities attractive for new people and businesses. Something must give.

We can’t tax or cut our way to prosperity. We have to find the right balance and must be quicker to embrace change. After all we demanded it in 2008 and affirmed it in 2010.

Also published in the South Bend Tribune

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