* Area officials see possible impact of Circuit Breaker
The property tax caps may not necessarily mean lower property tax bills.
Recently, representatives from H.J. Umbaugh and Associates, Indianapolis, presented their findings from the Circuit Breaker Tax Credit Analysis to individuals from each of the taxing units in Clay County.
Umbaugh Executive Partner Gary Malone explained how much each of the taxing units could anticipate to lose in the next couple of years because of the Circuit Breaker, and how various utilizations of a Local Option Income Tax (LOIT) would affect both the taxpayers and the taxing units.
Other than the property tax caps limiting how much an individual or business can pay in property taxes, Malone said the biggest issue the county is facing is a stagnant growth rate.
"Each of the taxing units in the county need to be very conscious of its tax base," he said. "We are projecting a small increase in assessed values in the next couple of years, and if those values don't go up as much as the anticipated levies, tax rates will go up."
Malone added current estimates show the growth rate between 2009 and 2011 to be about 0.22 percent on gross assessed value and 0.27 in net assessed value, which is small compared to the state's projected controlled fund levies (General Fund) growth of 3.8 percent in 2010 and 3.6 percent in 2011.
Without a LOIT in place, the combined impact on all taxing units would be a loss of approximately $586,547 in 2010 and $672,897 in 2011 with the City of Brazil and the Clay Community School Corporation taking the biggest hits with a loss of more than $200,000 apiece in each of those years (see table for approximate amounts).
For the majority of taxing units that will take loss in property tax revenue, the hardest hit will come in the General Fund, while the school corporation will see its losses in the Debt Service, Capital Projects and Transportation funds.
Malone explained that with the homestead and various other credits, the impact will be felt less from those within the 1 percent caps.
"With the credits available, most homestead properties would fall under the 1 percent cap for the next couple years," he said. "The biggest impact will come from the 2 percent level, which is for all other residential, agricultural land and long-term health care facilities."
While projections are anticipating a small loss from homestead properties through 2011, some of those in attendance inquired about the possible impact in the long term.
"So if the assessed values continue to stay about the same, can we expect a big hit on the 1 percent tax cap level in 2012 and beyond?" CCSC Business Manager Mike Fowler asked. "I am also curious as to how much of an increase the county would need in its assessed values to sort of balance things out."
Malone responded, "If assessed values remain about the same in the next few years, there would be more people benefiting from the tax caps on homestead properties because the tax rates would continue to rise. Also, we have not looked into exactly how much the values would have to go up to balance things out, but it is something we can look into."
Malone added there are options the county could take when instituting a LOIT which would reduce the impact the Circuit Breaker would have.
"With one option regarding the Property Tax Replacement LOIT, it could be instituted uniformly across all tax payers, and another could be only as a Qualified Residential Credit, which would be only on the 2 percent cap," Malone said.
According to the report provided by Umbaugh, instituting the 1 percent LOIT uniformly would reduce the impact down to about $116,000 in 2011, while a 0.75 percent LOIT on Qualified Residential properties would knock it down to about $107,000, which is a large difference in that year compared to the $672,897 loss the county as a whole would see if a LOIT was not in place.
Should either a Levy Growth Replacement or a Property Tax Replacement LOIT be instituted, it would also open the door for an additional LOIT for up to 0.25 percent to be put in place which would generate approximately $1 million a year to be used for public safety needs -- police, fire, etc.
"At this point, it would make more sense to go with the LOIT on Qualified Residential properties since that is where the biggest impact would be, and it would be a lower LOIT percentage," Malone said. "Plus, the county has the ability to choose one direction now, and they can change things up in the future if it needs to."
The Clay County Council has set a special meeting for the purpose of discussing the LOIT options further for 6 p.m., Monday, Oct. 19, in the Commissioners' Courtroom at the Clay County Courthouse. The public is welcome and encouraged to attend.
Hitting where it hurts
The following table lists how much property tax revenue the City of Brazil, Brazil Township, Clay City, Clay County, the Clay Community School Corporation (CCSC) and Brazil Public Library is anticipated to lose each year through 2011 due to the Circuit Breaker Tax Credit:
Some of the other taxing units have anticipated property tax levy funding losses as well, most of which are less than $310 with the exception of the Town of Harmony, which could lose $1,092 in 2010 and $1,395 in 2011.