Wednesday, January 25, 2017

The Effect of Tax Caps on Local Services

Posted by: Jeff Rea
President and CEO
South Bend Regional Chamber on Wednesday, January 25, 2017 at 12:00:00 am
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The town of Osceola dominated the headlines this past week as it wrestled with the best way to provide fire protection to its residents. Osceola has struggled to respond to emergency service calls and the Penn Township Fire Department has stepped forward to fill that need. The issue came to a head as Penn Township protested about not getting paid to provide such a service.

The story is just the latest example of the struggles of local governments as they react to shrinking revenues and the fiscal impact that the full implementation of property tax caps will cause when it goes into effect in 2020. The rest of Indiana has already made this adjustment; Lake and St. Joseph counties will be the last to make the change.

The Indiana General Assembly passed the tax caps into law in 2008. The caps were set at 1 percent of the assessed value for residential property, 2 percent for rentals or agricultural land, and 3 percent for commercial property. Those caps were placed in the state Constitution in 2010 when 71 percent of Indiana voters voted in support. At the same time, a 1 percent sales tax increase was passed to help lessen impacts.

Experts predicted the tax caps would save the taxpayers/cost local government around the state about $500 million. Most local governments believe that number was low and in St. Joseph County, taxpayer savings is approaching $70 million annually among all taxing units.

In an effort to keep up with the rising demand for services and the increased costs associated with delivering those services, we’ve seen local governments begin to make major changes in how they do business.

The closing of a public pool, the sale of city-owned golf courses, the changing of bus routes, the consolidation of the 911 center, the limiting of where people can pay their taxes, the hours at the libraries or across-the-board budget cuts are just some of the steps we’ve seen to date. Most of those actions have been unpopular to a vocal public that supported tax caps.

To date the public safety units have largely been spared from the cutting board, but the Osceola situation scratches the surface of an issue we’ll hear a lot more about in the years to come. In St. Joseph County, we have at least 12 different fire departments that cover various parts of the geography. They, like Osceola, may soon find that the tax rate simply won’t support the level of service that residents have come to expect.

Consolidation of any services is a difficult conversation. Each jurisdiction wants to be in control of its own destiny and wants to determine the level of service it believes is appropriate. The key question will be whether taxpayers are willing to pay for that.

So what’s next? The news could be dominated in the years to come by the threats of closings or the elimination of services and reductions in staff. That won’t help efforts in our region to attract new people, new jobs and new investment. In fact it could really hamper those efforts.

Or we could begin working outside of the silos and collectively across political boundaries and across party lines toward potential solutions.

It’s time for a countywide plan that includes each of the cities, towns and townships, for how critical services like fire and police protection, road maintenance, general government operations, recreation services and other quality-of-life improvements will be delivered and paid for. The business community stands ready to offer its experience and expertise to preparing that plan.

Also published in South Bend Tribune

Friday, January 13, 2017

Roads Funding Hot Topic During General Session

Posted by: Jeff Rea
President and CEO
South Bend Regional Chamber on Friday, January 13, 2017 at 12:00:00 am
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The debate is underway at the Indiana General Assembly about 2017 priorities. It’s a budget year, so there is a long line of worthy endeavors hoping to find a spot in the biennial budget. Legislators are left with the task of prioritizing the state spending and ensuring the long-term financial stability of the state.

Perhaps no issue will get more attention than infrastructure funding. Experts estimate our roads and bridges need close to $1 billion more annually for upkeep. That really would allow us only to take care of what we have; additional dollars would be needed for new projects.

The simple truth is there is no way to accomplish this goal without it costing you and me a little more money. A variety of proposals out there seek to collect the needed funding from a variety of different sources. As with any proposal to raise taxes or fees, it likely will face some opposition. At the same time, it is expected many will step forward now in support. I’m one who believes the time is now to fund the state’s 20-year transportation plan.

The tolling of existing interstates will be one option that is studied. I’m a believer in this “user” fee: When I want the speed and convenience of the Toll Road, I utilize it. I think others around the state would follow suit. The Indiana Toll Road helped us pay for 20 years of transportation needs. New toll roads will help address the next 20.

Certainly the easiest section of interstate to toll would be that 24-mile section of I-80 between the west end of the Indiana Toll Road at Portage and the Illinois state line. Some might argue that users through this corridor are already used to tolling through Illinois, Indiana, Ohio and Pennsylvania. Critics might argue that those in the north part of the state have already paid a disproportionate share with the Toll Road being in existence since the 1950s and it’s time to look toward other parts of the state.

Tolling an existing interstate roadway won’t be popular or easy to do, but could very quickly raise the kind of funds necessary to fund state transportation needs. It remains to be seen whether elected officials will have the appetite to initiate such difficult change.

Without a tolling plan, additional pressure is placed on other funding options like an increase in the gas tax. Such a change was easier to consider a month ago when gas prices were closer to $2 per gallon than it might be now with gas prices averaging about $2.30 per gallon. The last time the gas tax was adjusted was 14 years ago. A change this time around should include indexing the tax to inflation. A 10-cent increase would add about $4 to the average user's monthly bill.

Additional annual fees on vehicle registrations also will be considered, including a statewide infrastructure improvement with a significant amount for electric vehicles that now don’t pay much of a gas tax but utilize the roadways.

It won’t get easier or cheaper to fix this long-term need. A balanced approach and widespread support will be necessary. Contact your legislators now and share your preferences for how to best solve this need.

Source: South Bend Tribune