report from indiana fiscal health policy institute

THEFISCALHEALTHOFINDIANA’S

LARGERMUNICIPALITIES

byJohnStaffordDecember2015

THEFISCALHEALTHOFINDIANA’SLARGERMUNICIPALITIES

ReleasedonDecember8,2015AbouttheAuthorJohnStaffordretiredastheDirectoroftheCommunityResearchInstituteatIndianaUniversity-PurdueUniversityFortWaynein2013.Priortohistenyearserviceinthatcapacity,heservedinvariouspositionsinlocalgovernmentinElkhartandAllenCounties.HewasrecognizedbytheIndianaAssociationofCitiesandTownsasthe1999recipientoftheIvanBrinegarMunicipalManagementAward.JohnwasamemberoftheCityofFortWaynePublicFinanceTaskForcethatconductedanin-depthexaminationofthatmunicipality’sfiscalconditionin2012and2013.InFebruary,2014heco-authoredwithDr.LarryDeBoertheIndianaFiscalPolicyInstitute’sInformationBrief,ThePersonalPropertyTaxinIndiana:ItsReductionorEliminationIsNoSimpleTask.SummaryThepropertytaxcapsthattookeffectin2009haveaffectedthefiscalhealthofmunicipalgovernmentsofIndiana’slargercities.Theeffecthasvarieddependingonanumberoffactors,butgenerallynewsuburbancommunitieshavefaredbetterthantheirolder,industrialcounterparts.Thispapertakesadeeperlookatthefactorsbehindthesedifferencesandassesseswhytheyhaveoccurred.Thereare18citiesinthestudy.Theyincludeallcitieswithpopulationmorethan50,000withthreeexceptions.JeffersonvilleandNewAlbanywereincludedtoincludesoutheastIndianaandIndianapoliswasexcluded.Thecombinedcity/countystructuremadeitimpossibletoevaluateIndianapolisandtheothercitiesonacommonbasis.Nevertheless,thecitiesincludedinthestudyrepresentasignificantportionofthestate’spopulationandisagoodeconomiccross-sectionofthestate.Thisstudydemonstrateshowthecombinationofrecessionandtheimpositionofpropertytaxeshaveaffectedlocalmunicipalfinances—andfindstheoutcomeishighlydependentondifferentfactorsineachcommunity.Yetthedataleadtosomeimportantconclusions.Amongthem,briefly:thecapshaveaffectedolder,industrialcitiesmorethansuburbanoruniversity-basedcommunities;localoptionincometaxesareamorecriticalcomponentofmunicipalfinance;GeneralFundandRainyDayFundbalancesdonotalwayscorrelatewithacommunity’sfiscalhealth;inmanycasesacommunity’sfiscalfateistiedtothepropertytaxcontrolsfirstenactedin1973.Thepropertytaxcapshaveindeedsavedmoneyforpropertyowners,butattheexpenseofthefinancesinseveralcitiesacrossthestate.Theeffectwasexacerbatedbythecoincidencethatthepropertytaxcapswereenactedduringarecession.Anyparticularcity’sfiscalhealth,however,waslargelydeterminedbyhowitrespondedtothecapsandtherecession.

TableofContents

Introduction 3TheCompositeEconomicIndex 4ChangesinPropertyAssessedValuation 5PropertyTaxRates 14PropertyTaxLevies 18CircuitBreakerCredits 21LocalIncomeTaxRevenues 26TheFiscalCapacityIndex 31FundBalances,ExpendituresandReceipts 33IntergovernmentalRevenues 38HighwayFunding 39Debt 41KeyObservations 44Conclusions 46

IntroductionIndiana’slargercitiesarecriticaltotheeconomicwell-beingofthestate.The18citiesexaminedinthisstudyaccountfor22percentofthestate’scurrentpopulation.The15countiesinwhichthesecitiesarelocatedaccountfor62percentofIndiana’sprojectedpopulationgrowthbetween2014and2040;44percentofthestate’s2013GrossRegionalProduct;45percentofthestate’scurrentemployment;and44percentofIndiana’stotalpersonalincomein2014.Theyarecertainlyasignificantpartofthestate’seconomyandthereforethefiscalhealthofthesecoremunicipalitiesshouldbeofconcerntoallinIndiana.

ThemunicipalgovernmentsinIndiana’slargercitieshavebeenfinanciallyimpactedbythecombinationoftheGreatRecessionandthepropertytaxcapsenactedin2008.Towhatdegreehastheimpactimpairedthefiscalhealthoftheselocalgovernments?Thisstudyexaminesavarietyofmunicipalfinancialindicatorsinanattempttoaddressthisquestion.Whilethefollowinginformationcertainlydoesnotprovidealloftheanswersandisnotasubstitutefortheinternalinsightsthatcanbeprovidedbylocalpublicofficials,itdoesprovideanobjectivewindowintosomeoftheimpactscommontoallofthe18selectedmunicipalgovernments.Italsodemonstratesthattheimpactsoftherecessionandthepropertytaxcapshavebeenquitedifferentbetweenandamongthesemunicipalities.IncludedinthestudywereallIndianacities,otherthanIndianapolis,witha2014populationestimatedtobegreaterthan50,000:

Anderson(55,455) Bloomington(83,322) Carmel(86,682)Elkhart(51,421) Evansville(120,346) Fishers(86,325)FortWayne(258,522) Gary(77,909) Greenwood(54,491)Hammond(78,384) Kokomo(57,085) Lafayette(70,654)

Muncie(70,211) Noblesville(57,584) SouthBend(101,190) TerreHaute(60,956)AlsoincludedweretwomunicipalitiesfromsoutheastIndianatoprovidegeographicbalancetothestudy:

Jeffersonville(46,440) NewAlbany(36,589)

IndianapoliswasnotincludedduetothedifferencesinmunicipalfinanceinIndiana’sonlyconsolidatedcitycomparedwiththatoftheothermunicipalitiesexaminedinthestudy.Insomecases,suchdataonthedistributionoflocalincometaxes,itwassimplynotpossibletoseparatethe“municipal”andthe“county”typesoffunctionsassociatedwithlocalgovernmentinIndianapolis/MarionCounty.

Whileeachofthe18municipalitiesisunique,therearesomeoveralltrendsthatcanbegleanedfromareviewoftheexamineddata.Thisstudyisnotadetailed,comprehensiveexaminationofeachmunicipality’sfinancesbutratherisanefforttofindsomecommonthemes.Asisnormallythecasewithmunicipalgovernments,eachofthe18municipalitiesstudiedhereprovidesasomewhatdifferentsetofservicesandatdifferentlevels.Sometimesthisisrathereasytoseefromthedataexaminedand

sometimesthedifferencesarequitedifficulttounderstand.Inaddition,therearelikelymanyfinancialfactorswhichmaynotbeapparentthroughthepublicallyavailabledatausedasthebasisforthisstudy.OneexamplefamiliartotheauthoristheFortWayneLegacyFund.Theproceedsfromtheleaseandultimatesaleofitselectricutilityprovidesarevenuesourceofapproximately$75milliontothemunicipalitythatisdissimilartorevenuestreamsavailabletoothermunicipalities.Therearelikelyseveralotherrevenuesourcesavailabletoothermunicipalitiesforwhichtheauthorisnotknowledgeable.TheCompositeEconomicIndexAnunderlyingassumptioninthisstudyisthattherelativestrengthorweaknessofalocaleconomywillplayasignificantroleinamunicipality’slong-termfiscalhealth.Inanattempttobetterunderstandtherelativeeconomicconditionwithinwhicheachofthese18municipalitiesisoperating,aCompositeEconomicIndexwascreatedutilizingtheweightedrankingoneachofsixeconomicanddemographicvariables.

*Short-ternPopulationGrowth(weightingfactorof1)*Long-termPopulationGrowth(weightingfactorof1)*Short-termEmploymentGrowth(weightingfactorof2)*Long-termEmploymentGrowth(weightingfactorof1)*Short-termGrowthinTotalPersonalIncome(weightingfactorof2)*2013PerCapitaPersonalIncome(weightingfactorof3)*2008-2014ChangeinGrossAssessedValuation(weightingfactorof2)*2014GrossAssessedValuationPerCapita(weightingfactorof2)

Figure1illustratestheEconomicIndexrankingforthe18selectedmunicipalities.Notsurprisingly,thefourmunicipalitiesinthe“collar”countiesadjacenttoMarionCounty(Carmel,Fishers,GreenwoodandNoblesville)havebeenoperatinginthemostadvantageouseconomicenvironments.Twocities,BloomingtonandLafayette,havinglargeuniversitystudentbodieslocatedwithinoradjacenttothemalsofaredwellonthisEconomicIndex.Conversely,traditionalmanufacturingcenters,oftendominatedbytheautomotiveindustry,tendtohavebeenoperatinginthemostchallengingeconomicclimates.TheCityofJeffersonvillebenefitedfromhavingthehighestgrowthingrossassessedvaluation,substantiallyduetoannexation.TheCitiesofCarmelandFishershadthehighestCompositeEconomicIndexScoresof265andtheCityofAndersonhadthelowestscoreat61.

ChangesinPropertyAssessedValuationTheIndianapropertytaxcaps(circuitbreakers)enactedin2008havemadeaunit’sassessedvaluationgrowthofcriticalimportancetoitsnetpropertytaxrevenueinamannernotexperiencedsincetheenactmentofthe“Bowen”propertytaxcontrolsintheearly1970s.Anexaminationoftheassessedvaluationtrendsinthe18selectedmunicipalitiesindicatesawidevariationamongthegroupfornearlyeveryaspectexplored.AsillustratedinFigure2,11ofthe18selectedmunicipalitiesexperiencedanincreaseingrossassessedvaluationbetween2007pay2008and2014pay2015.Thecompositechangeovertheperiodwasa4.1percentincrease.TheCityofJeffersonvilleleadsthegroupwitha54.0percentincrease,muchofwhichcouldbeattributedtoannexation.TheCityofFishersledallothercommunitieswithjustundera25percentincrease.Sevenmunicipalitiesexperiencedanactuallossingrossassessedvaluationovertheperiod.

AsseeninFigure3,thereisconsiderablevariationamongthe18selectedmunicipalitiesintheratiobetweennetandgrossassessedvaluation.Theimpactofthevariousreductionsofgrossassessedvaluation(homesteaddeductions,taxexemptproperty,taxabatements)playsoutdifferentlyamongthestudiedcommunities.TheCityofElkhartisabletocaptureasitspropertytaxbase(certifiednetassessedvaluation)73.5percentofitsgrossassessedvaluationin2014pay2015.1Attheotherendofthespectrum,theCityofAndersonisonlyabletotax50.5percentofits2014pay2015grossassessedvaluation.Thecomposite2forthe18municipalitiesis61.5percentforthe2014pay2015assessmentyear.Thisisdownfromacompositelevelof70.7percentin2007pay2008.ThischangeisareflectionoftheimpactthattheincreaseintheHomesteadDeductionandthecreationoftheSupplementalHomesteadDeductionhadonthesemunicipalities’abilitytotaxtheirrespectivefulltaxbases.

1Thenetassessedvaluationiscalculatedafterfactoringouttheassessedvaluationincludedintaxincrementfinancingdistricts.Itisthetaxbaseforthenon-TIFpropertytaxsupportedfunds.2Term“composite”isusedthroughoutthisstudyasareferencetothesumofagivenvariableforall18municipalities.Forexample,asusedinthisparagraphitmeansthesumofallnetassessedvaluesforall18municipalitiesasapercentageofthesumofallgrossassessedvaluationsforthe18municipalities.

AsignificantpercentageofgrossassessedvaluationisnowremovedfromthetaxbasesofthesemunicipalitiesduetotheStandardandSupplementalHomesteadDeductions.In2007pay2008,theHomesteadDeductionrepresented13.7percentofthetotalgrossassessedvaluationforthecompositeofthe18selectedmunicipalities.TherewasnoSupplementalHomesteadDeductionatthattime.By2014pay2015,thecombinationofHomesteadDeductionandtheSupplementalHomesteadDeductionrepresented25.5percentofthecompositegrossassessedvaluationforthe18selectedmunicipalities.Figure4illustratesthemajorcomponentsofgrossassessedvaluationinthecompositeofthe18municipalities.Figure5illustratestheimpacttheincreaseinHomesteaddeductions(includingtheSupplementalDeduction)hashadonthetaxbaseofeachoftheselectedmunicipalities.

AsillustratedinFigure6,onlytwoofthe18selectedmunicipalitieshaveexperiencedanincreaseinnetassessedvaluationbetween2007pay2008(beforetheGreatRecession)andthemostrecentyear(2014pay2015)whiletheother16haveexperiencedadecrease.Aswasthecasewithgrossassessedvaluation,theCityofJeffersonville(11.4percent)experiencedthelargestincreaseincertifiednetassessedvaluation,dueinlargeparttosignificantannexations.AttheotherextremeistheCityofAnderson,whichhasexperienceda25.6percentdecline.Thecompositechangeforthe18municipalitiesovertheten-yearperiodwasan11.4percentdecrease.Yet,aswasillustratedinFigure

2,onlytwoofthese18municipalitiesexperiencedadecreaseingrossassessedvaluationoverthesameperiod.

Continuingthepatternofwidevariationsinassessedvaluetrends,thechangeinnetassessedvaluationsincetheimplementationoftheincreasedhomesteaddeductionsin2008pay2009andthemostrecentavailableassessments(2014pay2015)differsgreatlybetweenourselectedmunicipalities.ThesechangesforeachmunicipalityareillustratedinFigure7.Forexample,netassessedvaluationinFishersgrewby26.4percentoverthissixyearperiodwhileitdeclinedby16.8percentinSouthBend.CertainlytheGreatRecessionhadasignificantimpactonassessedvaluechangeduringthisperiod,butitclearlywasnotuniformlyfelt.TheprimarilysuburbancommunitiesofCarmel,Fishers,Greenwood,JeffersonvilleandNoblesvillewerethetopfivemunicipalitiesfornetassessedvaluegrowthoverthisperiod.Conversely,thecitiesofElkhartandSouthBendwhichwerebothhithardbytheGreatRecessionexperiencedthegreatestlossinnetassessedvalueoverthisperiod.

Afterthedramaticdeclineinnetassessedvaluationin2008pay2009duetotheincreaseinhomesteaddeductionsenactedinHEA1001-2008,thecompositeforthe18municipalitieshasremainedrelativelyflatinsubsequentyears.Therehasbeenamodestincreaseinthecompositenetassessedvalueoverthepasttwoyearsasthehousingmarkethasbeguntorecoverfromthedepressedrecessionlevels.

Overthepastyear,netassessedvaluehasincreasedin11ofthe18selectedmunicipalitieswhiledecliningintheotherseven.Figure9presentsthemostrecentchangeinnetassessedvaluationforthe18municipalities.Thecompositeforthe18hasbeenaslightincreaseof1.2percent.Aswithallothervariablesdiscussedinthissection,thevariationamongtheselectedmunicipalitieshasbeenfairly

substantial.Attheextremes,Hammondincreaseditsnetassessedvaluationby8.0percentandAnderson’snetassessedvaluationdeclinedby6.2percent.

Thereductioninnetassessedvaluationin2008pay2009,dueprimarilytotheincreaseinthehomesteaddeductions,wasnotfeltuniformlyacrossthe18municipalities.AsillustratedinFigure10,17ofthe18selectedmunicipalitieslostnetassessedvaluationbetween2007pay2008and2008pay2009;withtheCityofJeffersonvillebeingtheonlyexception(againlikelyduetotheimpactofsignificantannexation).Nineofthe18municipalitiesexperiencedadeclineofatleast10percent,withCarmelandAndersonbothexperiencingadropofatleast20percent.Thecompositelossinnetassessedvaluationwas12.6percent.

Thereisarelativelylargerangeinthenetassessedvaluationpercapitaacrossthe18municipalitiesasillustratedinFigure11.Carmelhasa2014pay2015netassessedvaluationpercapitaof$74,774comparedwiththeCityofSouthBend’s$22,041.Thisisaverysignificantdifferencebetweenthesemunicipaltaxbases.Amongotherfactors,itappearstoindicatethedecliningimportanceofindustrialdevelopmenttothetotaltaxbaseandthegrowingimportanceofhigh-endresidentialdevelopment.

Thereisalsoawidevariationintheimpacttheuseoftaxincrementfinancinghashadonthegeneralfundtaxbaseofthese18municipalities.Figure12illustratesthepercentageofthenetassessedvaluationcapturedinTIFdistrictsbytherespectivemunicipalities.BothSouthBendandJeffersonville

havecapturedmorethan24percentoftheirrespectivetaxbasesinTIFdistrictswhilesevenofthe18municipalitieshavecapturedlessthan10percentoftheirtaxbases.

ThepercentageoftaxbasecapturedinTaxIncrementFinancingDistrictshasbeengrowingineveryselectedmunicipalityotherthanHammond.ThepercentageofnetassessedvaluationcapturedinTIFdistrictsforthecompositeofthe18municipalitiesgrewfrom5.6percentin2008to12.0percentin2015.

PropertyTaxRatesInadditiontotheirtraditionalimpactinindividualpropertyowners,propertytaxrateshaverecentlygainedadditionalsignificanceformunicipalgovernmentfinanceduetothedirectrelationshipbetweentaxratesandCircuitBreakerCreditsandthecorrespondingimpactthesecreditshaveonactualpropertytaxrevenues.Presentedbelowareseveralkeyobservationsregardingpropertytaxratesforthe18selectedmunicipalities.3AsillustratedinFigure13,thereissignificantdisparityinthepropertytaxratesdirectlyassociatedwiththe18selectedmunicipalities.In2007,thehighestrateamongtheselectedmunicipalitieswastheCityofGary’srateof$3.1038per$100ofassessedvaluation.Thiswas9.6timeshigherthantheTownofFishers’rateof$0.3234.By2015,thedisparitybetweenthehighest(theCityofSouthBendat$3.4314)andthelowest(theCityofFishers’at$0.6202)haddroppedto5.5.The2015certifiedpropertytaxratesforthe18municipalitiesarepresentedinFigure14.

Generally,propertytaxrateshavebeenontheincreasefortheseselectedmunicipalities.TheactualchangeinthecertifiedpropertytaxrateforeachmunicipalityispresentedinFigure15andthepercentagechangeinratesisillustratedinFigure16.Between2007and2015,thepropertytaxratefor16ofthe18municipalitieshadincreased,withonlytheLakeCountycitiesofGaryandHammondexperiencingaratedecreaseovertheperiod.ThedecreaseforthesetwomunicipalitieswaslikelyattributabletotheuniquepropertytaxcontrolsputinplacebytheIndianaGeneralAssemblywhichwereapplicableonlytoLakeCountytaxingunits.Between2009and2015,themedianpropertytaxratefortheselectedmunicipalitiesincreasedby39percentwhilethecompositecertifiednetassessedvaluationincreaseby1.5percent.2009wasselectedasthebeginningdataforthiscalculationasthe2008-2009rateswheresignificantlyimpactedbytheHEA1001-2008.

3InformationpresentedinthissectionwasobtainedfromtheAnnualCertifiedBudgetOrdersfortherespectivemunicipalitiesasapprovedbytheIndianaDepartmentofLocalGovernmentFinanceandmadeavailableonthatagency’swebsite.

Therespectivemunicipalpropertytaxrateisonlyoneofseveraltaxingunitratesthatcomprisethetotalpropertytaxrateforanygiventaxingdistrict.Perhapsmostimportantlyforthisstudy,itisthetotalrateinthetaxingdistrictswithinagivenmunicipalitythatdeterminestheCircuitBreakerimpactforthatrespectivemunicipality,notjustthemunicipalrate.Onceagainillustratingthateachofourmunicipalitiesbringsauniquesetofvariablestothediscussionoftheirfiscalhealth,thereisasubstantialdisparityontheportionofthetotalpropertytaxrateattributabletothegivenmunicipality.Figure17presentsthepercentageofthetotaltaxraterepresentedbythemunicipalityinthetaxing

districtwiththehighestratethatincludestherespectivemunicipality.Forexample,theCityofSouthBend’s2015raterepresents57percentofthetotalrateinthetaxingdistrictwithinSouthBendthathasthehighesttotalrate(SouthBend-PortageTownship).Conversely,theCityofGreenwood’srateis23percentofthetotalrateofthetaxingdistrictwiththehighestratewithinGreenwood(GreenwoodCity-CPSCH-PLTWP-GWDLibrary).

Municipalitiesvarygreatlyinwhatfunctionstheychoosetoundertake,atwhatleveltheychoosetoprovidethosefunctions,andhowtheychoosetofundthem.Thecompositionofeachofthese18municipalities’propertytaxratesisyetanotherindicationofthisdiversity.Forexample,11ofthe18haveenactedaCumulativeCapitalDevelopmentFund(whichisarate-controlledfundoutsideofthemaximumlevycontrols);11havepropertytaxsupportedDebtServiceFunds(alsooutsidethelevycontrols)andonlythreehaveDebtServiceFundratesthatexceed10percentoftheirtotalrate;sevenofthe18devoteaportionoftheirpropertytaxratetosupporttheirMotorVehicleHighwayFund;andfourofthe18continuetofundsomeportionofPoliceandFirePensionobligationsoutoftheirpropertyrate.Additionally,threeofthesemunicipalitieshaveseparateSanitaryDistrictsthathaveapropertytaxrate;infivemunicipalitiestheoperationandorcapitaldevelopmentoftheirregionalairportsis,inpart,supportedbypropertytaxesraisedbyaseparateairportauthority;andthreehaveredevelopmentactivitiessupportedbypropertytaxesfromaseparateRedevelopmenttaxrate.Atleastoneor,insomecasesseveral,oftheselectedmunicipalitiesfinancethesefunctionsatleastinpartthroughthemunicipalitiesownpropertytaxrate.Figures18and19respectivelyillustratetheindividualratesfortheCumulativeCapitalDevelopmentFundandtheDebtServiceFundsforeachmunicipality.

Whathavebeenthekeydriversofpropertytaxrateincreasesamongthese18municipalitiesbetween2007and2015?Figure20illustratesthemedianannualchangeinbothpropertytaxratesandnetassessedvaluationforthe18selectedmunicipalities.ThetakeoverofkeymunicipalPoliceandFirePensionobligationsbythestateaspartofthe2008taxreformsservedtolowerratesinthesemunicipalities.Conversely,smallincreasesintheaggregateDebtServiceandCumulativeDevelopmentFundrates(bothoutsidethecontrolledlevies)servedtoincreaserates.However,itmustbeassumedthatthatvastmajorityoftheaggregaterateincreaseforthese18municipalitiesmustbeduetotheannualgrowthinassessedvaluationbeinglessthantheannualgrowthquotientformanyofthe

selectedmunicipalities.Whenannualgrowthinnetassessedvaluationforamunicipalityislessthantheallowedincreaseinthepropertytaxlevy(andassumingthatthemunicipalitywilltakeitsmaximumlevy),thenthepropertytaxratewillincrease.AsratesincreasesodothelevelofCircuitBreakerCredits.Therefore,whilemunicipalitiesincreasetheirannualpropertytaxratestocapturethemaximumallowablepropertytaxlevies,theyalsoareincreasingtheirCircuitBreakerCreditlosses.Thekeytoescapingthisself-defeatingcycleistoexperiencemeaningfulgrowthinnetassessedvaluations–togrowthepropertytaxbase.

PropertyTaxLeviesThepropertytaxhashistoricallybeenthemostimportantsourceofrevenueformostmunicipalgovernmentsinIndiana,justasithasbeeninmoststates.Thisisstilltruetoday,althoughmuchlesssothanpreviouslyinIndianaduetotheincreasingimportanceoflocaloptionincometaxesandtheimpactofthepropertytaxcaps.ThedataexaminedinthissectionaretheannualcertifiedleviesbeforethereductionsattributabletotheCircuitBreakerCreditsaretakenintoaccount.ThesearethepropertytaxleviesascertifiedbytheIndianaDepartmentofLocalGovernmentFinanceduringthatagency’sannualapprovaloftheunit’sbudgets,ratesandleviesforthepropertytaxsupportedfunds.Theydonotrepresenttheactualcollectionofpropertytaxrevenuebyeachrespectivejurisdiction.

TheGreatRecessiondidreducetheinflation-adjustedcertifiedpropertytaxleviesfortheaggregateofthe18selectedmunicipalities.Figure21presentsthecompositeactualandinflationadjustednetleviesforthe18municipalities.Intermsofrealpurchasingpower,thelowpointoccurredin2009(forthe2006-2015timeperiod).Thecompositeofthecertifiedleviesforthe18selectedmunicipalities,afteradjustingforinflation,havebeenontheincreasesince2011.Theactualcompositelevyincreasedby24percentbetween2006and2015.Afteradjustingforinflation,thatincreasewas5percent.

AsillustratedinFigure22,16ofthe18selectedmunicipalitiesexperiencedanincreaseintheirrespectivecertifiedleviesbetween2007(theyearbeforetheGreatRecession)and2015.BothGaryandHammondexperiencedanactualdecreaseintheirleviesoverthisperiod,dueatleastinparttotheextraordinarypropertytaxcontrolsplacedonLakeCountyjurisdictionsbytheGeneralAssembly.FishersandJeffersonvillebothhadlevygrowthinexcessof100percentoverthisperiod.Thecompositeincreaseforall18municipalitiestakenasanaggregatewas21.3percent.

Asisseeninmanyinstancesthroughoutthisstudy,thereisgreatvariationamongthe18municipalitieswhenleviesareviewedonapercapitabasis.In2014,the$872percapitacertifiedlevyfortheCityofGarywasnearlyfourtimeslargerthanthepercapitalevyfortheCityofGreenwood.

Goingbacktotheearly1970sandthe“BowenTaxControlProgram”,theIndianaGeneralAssemblyhasplacedlimitationsonthegrowthyearoveryearofmostlocalgovernmentpropertytaxlevies.ThecurrentlegislationbasicallylimitsannuallevygrowthtotheIndianasix-yearrollingaverageofnon-farmpersonalincomegrowth,commonlyreferredtoasthe“annualgrowthquotient”.Thisisanattempttokeeppropertytaxesfromexceedingthecollectiveabilitytopaypropertytaxes.Exceptionsaremadeforexceptionalgrowthinnetassessedvaluationsuchasmayarisefromannexation.Therearedifferentprovisionsmadeforleviesassociatedwithrate-controlledfunds,suchasamunicipalCumulativeCapitalDevelopmentFund,andDebtServiceFunds.Forthe2011-2015timeperiod,thebasicstatewidesix-yearrollingaverageofnon-farmpersonalincomewas11.5percent.AspresentedinFigure24,13ofthe18municipalitiesincludedinthisstudyhadmaximumallowableleviessetabovethatstatewidegrowthquotient,indicatingthatmitigatingfactorssuchasannexationhadallowedtheirrespectivemaximumlevytobesetabovethelevelestablishedbythegrowthquotientalone.

CircuitBreakerCreditsTheadoptionofthepropertytaxcaps,formerlyknownastheCircuitBreakerCredits,hasunquestionablyhadthebiggestimpactonmunicipalfinanceinIndianasincetheenactmentofthepropertytaxcontrolsintheearly1970s.However,theimpactofthesetaxcapshasbeenfarfromuniformacrossthe18municipalgovernmentsincludedinthisstudy.ThecompositeofCircuitBreakerCreditsforthe18municipalitieshasgrownfrom$30millionin2009to$161millionin2015.ThisgrowthisillustratedinFigure25.Withtheexceptionof2014,eachyear’scompositeofCircuitBreakerCreditshasbeengreaterthantheprioryear.However,overthepastthreeyearstheaggregateamountofCircuitBreakerCreditsimpactingthesemunicipalitiesdoesappeartohavebeguntolevel.

TheCircuitBreakerCreditshadsignificantlydifferentimpactsonourpoolofselectedmunicipalities,asisillustratedinFigure26.TheCityofSouthBendhadthelargestpropertytaxlossduetotheCircuitBreakersin2015at$31,636,602.Conversely,theCityofBloomingtonlostonly$227,803inpotentialrevenueduetothepropertytaxcaps.ThreeofthefourselectedmunicipalitiesthatwerelocatedincountiesadjacenttoIndianapolisalsoexperiencedonlyaverymodestimpactfromthepropertytaxcaps.

AsillustratedinFigure27,in2015theCircuitBreakerimpactrangedfrom,onthehighendreducingtheCityofMuncie’scertifiedpropertytaxlevyby45percenttoaslittleanimpactasthe0.8percent

reductiontotheCityofBloomington’snetcertifiedpropertytaxlevy.Toputitmildly,thatisatremendousvariation.Thecompositeimpactin2015onthe18municipalitieswasa21percentreductionofthecombinedcertifiedlevies.

Whilethegeneralpatternfortheaggregateofthe18municipalitieshasbeentherecentlevelingoftheCircuitBreakerimpact,heretoothereisconsiderablevariationamongtheindividualmunicipalities.Attheextremes,theCityofKokomoexperienceda22.8percentincreaseinCircuitBreakerCreditsbetween2014and2015whileFishersexperiencedan18.5percentdecrease.Thecompositechangewasa5.4percentincrease.

Furtherillustratingthewidevariationintheimpactofthepropertytaxcapsonthe18municipalitiesistherangeintheamountofCircuitBreakerCreditspercapita.AsseeninFigure29,theCityofGarylost$39perresidentin20154whiletheCityofBloomingtonlostonly$3perresident.Thecompositelossforthe18municipalitieswas$111perresidentin2015.

Examiningthe2015CircuitBreakerimpacttotheselectedmunicipalitiescomparedwiththeirrespectivepropertytaxbasesindicatesanevenwiderdisparitythanisfoundonapercapitabasis.TheCityofSouthBendlost$1,418per$100,000ofnetassessedvaluationwhiletheCityofBloomingtonlostonly$7per$100,000ofnetassessedvaluation.

42014populationestimateswereusesas2015estimatesarenotyetavailable.

Thereisarelationshipbetweenthepropertytaxratesoftheselectedmunicipalitiesandthelevelofpropertytaxcapimpactontheirpropertytaxlevies.However,thecorrelationislessthandirectduetotheinfluenceofthetaxratesimposedbytheothertaxingunitswhichsharethesametaxbaseastherespectivemunicipalities.Figure31illustratesthe2015CircuitBreakerCreditsfor18municipalitiesalongwiththeirrespectivepropertytaxrates.

TheimpactthattheCircuitBreakerCreditshaveoneachmunicipality’sfinancialhealthwillbemorefullydiscussedinthesectionontheFiscalCapacityIndex.

LocalIncomeTaxRevenuesEverycountyinIndianahasnowadoptedatleastoneoftheeightvarietiesoflocaloptionincometaxes.Withtheenactmentofthepropertytaxcaps,localincometaxesareplayinganincreasinglyimportantroleinfundingmunicipalgovernmentactivitiesinIndianaandarelikelytodointotheforeseeablefuture.Ofthe18selectedmunicipalities,five(Carmel,Evansville,Fishers,Greenwood,andNoblesville)arelocatedincountieswithacombined2015localincometaxrateof1.0percent.ThemunicipalitiesofAnderson,Elkhart,Jeffersonville,Kokomo,andSouthBendallarelocatedincountieswitharateinexcessof1.5percent.Since2008,nineofthe15countiesinwhichtheselectedmunicipalitiesarelocatedhaveexperiencedanincreaseintheirrespectivetotallocalincometaxrate(Allen,Clark,Elkhart,Howard,Lake,Madison,Monroe,St.Joseph,andTippecanoecounties).LakeCounty(GaryandHammond)ledthisgroupintermsofthelargestrateincrease,goingfromnolocalincometaxin2008toarate1.50percentin2015.Theothersixcounties(Delaware,Floyd,Hamilton,Johnson,VanderburghandVigocounties)madenochangeintheirlocalincometaxratebetween2008and2015.

Ofthefourlocalincometaxtypesthatprovidedirectrevenuetothe18selectedmunicipalities,theCountyOptionIncomeTaxisthedominantsourceofrevenue,providingjustoverone-halfoftheaggregateincometaxrevenuetothe18municipalities.GiventherelativelyrecentcreationofthePublicSafetyLOIT,andthatthemaximumratethatitcanbeadoptedis0.25percentforallcountiesotherthanMarion,itisnotsurprisingthatitraisesonly11percentoftheincometaxrevenue.TheCountyAdjustedIncomeTaxwasneverapopularoptioninmosturbancounties,soitisalsonotsurprisingthatitalsorepresentsonly11percentofthetotal.Theremaining25percentoflocalincometaxrevenueinthese18municipalitiesisgeneratedbytheCountyEconomicDevelopmentIncomeTax.Tenofthe15applicablecountieshaveadoptedCEDIT.

AsisillustratedinFigure35,thetotalannualincometaxcertifieddistributionstotheselectedmunicipalitieswasontheincreasefrom2008through2010andthendeclinedsubstantiallyin2011buthasbeengrowingsince.Theannualcertifieddistributionoflocalincometaxrevenuetothe18selectedmunicipalitiesincreasedby35percentbetween2008and2015.Bycomparison,propertytaxrevenuesnetofcircuitbreakercreditsdeclinedby5.6percentbetween2008and2015.

15ofthe18selectedmunicipalitiesexperiencedatleastsomeincreaseintheirlocalincometaxdistributionsbetween2008and2015.TheCityofSouthBendhadthelargestincrease($13.4million),whileKokomo,TerreHaute,andNewAlbanyeachexperienceaslightdecrease.Therearelikelyatleast

threefactorsthatplayintotheseannualvariations:(1)theimpacttheGreatRecessionhadonpersonalincomesandtherecoveryofcountytotalpersonalincomesubsequenttotherecession;(2)theincreaseinlocalincometaxratesthathaveoccurredoverthisperiod;and(3)changesovertimeinthepercentageofincometaxdistributionsamongreceivingunitsofgovernmentwithinagivencounty.

Afteradjustingforinflation,11ofthe16selectedmunicipalitiesstillexperiencedanincreaseintheirlocalincometaxdistributions(GaryandHammondhadnolocalincometaxin2008).Thepercentagechangeincertifiedincometaxdistributionsbetween2008and2015,afteradjustingforinflation,ispresentedinFigure37.TheCityofSouthBendagainledthegroupwitha98.5percentincreaseininflation-adjustedincometaxrevenue.Thefivemunicipalitieswhichexperiencedadeclineininflation-adjustedincometaxrevenuewereGreenwood,Kokomo,Muncie,NewAlbanyandTerreHaute.Fourofthosewerelocatedincountiesthathadnochangeintheirincometaxratesbetween2008and2015.HowardCountydidadoptbothaPropertyTaxReliefLOITandaSpecialPurposeLOITsince2008.

Asnotedearlier,thedistributionsfromlocaloptionincometaxeshavebecomeamajorcomponentofrevenueforthemajorityoftheselectedmunicipalities.In2015,13ofthe18municipalitiesderivedmorethan25percentoftheir“coreincome”(definedhereasthecertifiedpropertytaxnetofCircuitBreakerCreditsanddirectlocalincometaxdistributions)fromoneormorelocalincometaxes.In2008,theaggregateofthese18municipalitiesderived23percentoftheir“coreincome”fromlocaloptionincometaxes.By2015thatproportionhadincreasedto30percent.Ifasubstantialchangeinthepropertytaxnetofcircuitbreakercredits/localincomedistributionratioisdefinesasanincreaseordecreaseof5percentorgreater,thensixofthe18municipalitieshaveahigherincometaxreliancein

2015thanin2008;onehasalowerreliance;and11hadapproximatelythesamereliance.TheCityofSouthBendexperiencedthelargestincreaseinthisratiogoingfrom13.9percentin2008to35.9percentin2015.

Amongthe18selectedmunicipalitiesthecitiesofBloomington,Evansville,FortWayne,Kokomo,andMunciehavetheprevailingcontroloftheirrespectiveCountyIncomeTaxCouncil.5Thisisacriticalpositionforself-determinationinlocalincometaxpolicymatters.TheFiscalCapacityIndexAfterexploringthechangeswhichhaveoccurredtothepropertyandincometaxrevenuestotheselected18municipalities,whathasbeentheoverallimpactonthefiscalcapacityofthesecities?Tobetterunderstandthatimpact,asimple“FiscalCapacityIndex”hasbeencreated.“Coreincome”formunicipalitiesasdefinedinthisstudyisthecombinationof(1)annualcertifiedpropertytaxleviesnetcircuitbreakercredits;and(2)annuallocaloptionincometaxcertifieddistributions.Inaddition,propertytaxlevieshavebeenadjustedtoremovethe2008leviesforthosePoliceandFirePensionFundsthatweretakenoverbythestatein2009toallowforamoreaccurateyear-toyearcomparison.6Thesetwosourcesrepresentthetwokeyrevenuesourcesformostmunicipalities.Thepropertytaxcomponenthasbeenimpactedbytheenactmentofthepropertytaxcapsandbythechangestoassessedvaluationbothoccurringthroughthe2008legislationtoincreasehomesteaddeductionsandbytherecessionholdingdown“natural”growthinassessedvaluation.Therecessionalsohadadepressingeffectonpersonalincomewhich,inturn,reducedincometaxrevenues.Secondly,theimpactofthepropertytaxcapshasbeenincludedbyreducingpropertytaxrevenuebytheamountofCircuitBreakerCreditsattributabletoeachmunicipality.

5Basedon2010U.S.Censuspopulationnumbers.6TheRedevelopmentCommissionpropertytaxleviesandCircuitBreakerCreditswereincludedforthecitiesofGary,HammondandSouthBend.

Aftertheannual“coreincome”wasdeterminedforeachmunicipality,thisrevenuewasthenadjustedforinflation,creatingtherealvalueoftheannualrevenueforcomparisonoverthe2008-2015timeframe.TheIndexisanattempttobetterunderstandwhichoftheselectedmunicipalitieshavegainedgreaterfundingstrengthovertheperiodandwhichhavebeenmostseverelyimpactedbythecombinationoftherecessionandthepropertytaxcaps.AsillustratedinFigure40,sixofthe18municipalitieshave2015inflationadjustedcoreincomegreaterthanwasavailablein2008.Jeffersonvilleappearstohavebenefitedfromlargeannexationswhichoccurredinthe2006-2009period.Whileitsrevenueshaveincreasedinrealterms,itsexpenseshavelikelyalsoincreasedsignificantlyduetoadditionalresponsibilitiestoprovideservicesinthenewlyannexedterritory.TheHamiltonCountymunicipalitiesofCarmelandFishershaveexperiencedlargeincreasesinassessedvaluationandhavelowpropertytaxratesresultinginlimitedCircuitBreakerCreditimpact.Theyhavealsoexperiencedsignificantgrowthinincometaxrevenuefromthe1.0percentHamiltonCountyCOITtax.Thepercentagegrowthintotalpersonalincomebetween2008and2013(mostrecentyearforwhichdataisavailable)washigherinHamiltonCountythaninanyoftheother14countieswithinwhichthe18selectedmunicipalitiesarelocated.

ThecitiesofBloomingtonandLafayettehaveexperiencedonlylimitednegativeimpactfromthelossofpropertytaxrevenuetotheCircuitBreakerCredits.Lafayetteisjustbarelyaboveitsinflationadjusted2008coreincomelevel(101.3percent).Lastly,theCityofFortWaynehasbenefitedfromadoptionofthePublicSafetyandPropertyTaxReliefLOITSandtheestablishmentofaCumulativeCapitalDevelopmentFund.LikeLafayette,theCityofFortWayneisjustequaltoits2008inflationadjustedcoreincomefundinglevel(100.7percent).Sixadditionalmunicipalitiesrangebetween99.7percentoftheir2008level(Evansville)and93.9percent(ElkhartandNewAlbany).ThemunicipalitiesofGreenwood(99.5percent),Noblesville(99.0percent)andKokomo(96.5percent)alsofellbetween100and90percentontheFiscalCapacityIndex.Inmostcases,thecombinationofmodestCircuitBreakerCreditimpactandareboundinincometax

revenuehasallowedtherespectivemunicipalitytomaintaincoreincomenotsubstantiallybelowtheir2008levels.ElkhartbenefitedfromtheenactmentofthePublicSafetyLOIT.Theremainingsixmunicipalitieshave2015coreincomelevelsbelow87percentof2008inflationadjustedlevels,rangingfromHammondat85.1percenttoGaryat69.8percent.TheotherfourmunicipalitiesthatfellinthislattercategorywereSouthBend(81.7percent),Anderson(79.2percent),TerreHaute(78.4percent),andMuncie(70.0percent).Fiveofthesesixmunicipalitieswerealsoamongmunicipalities(ofthe18)whichhadthehighestpercentageoftheir2015propertytaxrevenuelostthroughtheCircuitBreakerCredits.Inaddition,thosefivewereamongtheselectedmunicipalitieswhichhadthehighestpropertytaxratesin2015.Hammondwastheexceptioninbothcases.Intheindividualprofilesforeachoftheselectedmunicipalitiesthatwillbereleasedsubsequenttothisreport,therewillbeachartwhichillustratestheannualinflationadjustedcoreincomeasitcomparedwith2008coreincome.EachtellsauniquestoryaboutthefiscalpathtraveledbytherespectivemunicipalitysincetheGreatRecessionandtheadoptionoftheCircuitBreakerCredits.Foreveryyearthatinflationadjustedcoreincomefallsbelow100percentsomethingmustchange–eitherimprovementinefficiencyintheprovisionofservices,areductioninspendingonservicesandcapital,aspendingdownofcashbalances(thefocusofthenextsection),orthecreationofnewrevenuesourcessuchasuserfees.Figure41showsthelowpointforcorerevenueineachofthesemunicipalities.

FundBalances,ExpendituresandReceiptsOneofthemostimportantmeasuresofthefiscalhealthofaunitofgovernmentisthelevelofcashbalancesatyearendthatitisabletomaintain.Suchfundbalances,particularlyintheGeneralFundsoftherespectivemunicipalitiesthatarebeingexaminedinthisstudy,areanimportantindicatorthatannualrevenuesarekeepingpacewithannualexpenditures.Theyalsoreflectamunicipality’sabilityto

respondtounforeseenandthusunbudgetedexpendituresarisingfromemergenciesandotherextraordinarydemandsontheunit.7

Somemunicipalitieschoosetosupportanoperatingreservebycarryingasubstantialyear-endbalanceintheirGeneralFunds,somechoosetoprovideforsuchareservebycarryingabalanceintheirRainyDayFund,andotherschoosetocarrysubstantialbalancesinboth.Othermunicipalities,foravarietyofreasons,arenotabletocarryasubstantialbalanceineitherfund.Beingabletoendafiscalyearwithapositivebalanceinoneorbothfundsisbutoneimportantindicatorofthefiscalhealthofarespectivemunicipality.Forillustrativepurposes,thebalancesofbothfundsarecombinedinFigures42through45.OfparticularnotearethestrongbalancesthatboththeCityofSouthBendandtheCityofElkhartarecarryingintheirGeneralFunds.Inaddition,bothhavestrongbalancesintheirRainyDayFunds.TheFiscalCapacityIndexpresentedintheprevioussectionofthisstudywouldsuggestthatbothmunicipalitiesmayhavesomeleveloffiscaldifficulty,yetthestrongfundbalancepositionsforeachwouldsuggestotherwise.BothhavecombinedGeneralandRainyDayFundbalancesinexcessof$30milliondollars,morethantwicethatofanyothermunicipalityinthestudy.Attheotherendofthespectrum,threemunicipalities(Gary,HammondandTerreHaute)ended2014withnegativebalancesinthecombinationoftheirrespectiveGeneralandRainyDayFunds.NeitherGarynorHammondhadaRainyDayFund.TerreHautepartiallyoffsetits$5.4millionnegativebalanceinitsGeneralFundwitha$2.4millionpositivebalanceinitsRainyDayFund.InadditiontoSouthBendandElkhart,nineotheroftheselectedmunicipalitiesended2014withacombinedbalanceinexcessof$7.5million.ThecitiesofEvansville,GaryandHammondalsohavesignificantrevenuesfromlocalriverboatgaming.TheEvansvilleRiverboatCapitalProjectFundhada2014endingbalanceof$14,226,681;theGaryRiverboatFundhada2014endingbalanceof$1,016,885;andtheHammondGamingFundhadanendingbalanceof21,993,097.

7ThesourcesofthedatapresentedinthischapteraretheAnnualFinancialReportsassubmittedtotheIndianaStateBoardofAccountsandthattheinformationispre-audit.

Onecommonmethodforequalizingforthefairlysubstantialdifferenceinthesizeoftherespectivemunicipalitiesinthisstudyistoexpresstheyear-endbalancesonapercapitabasis.Whenviewedfromthisperspective,theCityofElkharthadacombinedGeneralFundandRainyDayFundbalancethatwasnearlytwicethatofthenexthighestmunicipality–SouthBend–andnearlythreetimesthebalanceofanyothermunicipalityinthegroup.Therankorderforthe18municipalitieschangesconsiderablywhenmoreappropriatelyviewedonapercapitabasis.Thecomposite(forthe18municipalities)2014year-endbalanceforthecombinedGeneralandRainyDayFundswas$101perresident.

Itisalsoimportanttoexaminewhathashappenedovertimetoeachmunicipality’syear-endbalances.Withboththerecessionandthepropertytaxcapsimpactinglocalgovernmentrevenuesin2009andbeyond,itwouldbeexpectedthatamunicipalitymightdrawdownonitsreservestocompensate.Yet,asillustratedinFigure44,overthe2009through2014period,tenof17oftheselectedmunicipalitiesactualincreasedtheircombinedGeneralandRainyDayFundbalances.TheCityofElkhartmanagedtoaddalmost$9.9milliontoitscombinedbalancesduringthisperiod($6.7millionincreaseintheGeneralFundbalanceand$3.2millioninitsRainyDayFundbalance).Conversely,thecitiesofEvansville,TerreHaute,HammondandFortWayneeachreducedtheircombinedyear-endbalancesbymorethan$6million.2009year-endbalanceinformationwasnotavailablefortheCityofLafayette.

Anotherfrequentlyutilizedmeasureoffiscalhealthisthepercentageoftheyear-endbalanceinamunicipality’sGeneralFundcomparedwithannualreceipts.Manyfinancialexpertssuggestthatmaintainingabalanceofbetween5and15percentofannualrevenuesintheGeneralFundisappropriatefiscalmanagement.AsseeninFigure45,tenofthe18municipalitieshadcombinedyear-endbalancesinexcessof15percentof2014receiptsinthecombinedGeneralandRainyDayFunds.Anotherfourhadbalancesbetween15and5percentofannualreceipts.Oftheremainingfourmunicipalities,onehadapositivebalancebelow5percentofannualreceiptsandthreehadnegativecombinedbalances.Fortheperspectiveofthisindicator,14ofthe18municipalitiesappeartohavefromreasonabletohealthtoextremelyhealthy(inthecasesofElkhart,SouthBend,andGreenwood)fiscalsituations.

TheAnnualFinancialReportsalsoprovideinsightintoverydifferentsizeandscopeofthe18municipalitiesincludedinthisstudy.Byexaminingthetotalannualexpendituresfor“AllGovernmentalActivities”(allfunctionsprovidedbyarespectivemunicipalityexceptitsenterpriseactivitiessuchasuserfeefundedutilities)percapitaonequicklyseesthevastdifferenceintheexpendituresmadebyeach.ThisrangeofexpenditurespercapitaispresentedinFigure46.In2014,theCityofGaryspentinexcessof$3,000perresidentinitsjurisdiction.Conversely,theCityofLafayettespentjustunder$1,200perresident.Therecanbemanyreasonsforsuchdifferences,includingthelevelofservicesprovidedandthevaryingcostofprovidingthoseservices.Itisyetonemoreindicatorthatnotallmunicipalitiesarethesame,dothesamethings,andfundactivitiesatthesamelevel.

IntergovernmentalRevenuesAsisthecasewithsomanyvariablesexaminedinthisstudy,thedependenceuponintergovernmentalrevenuevarieswidelyfrommunicipalitytomunicipality.8Itdoesappearthatthemunicipalgovernmentsfromtheolder,moreindustrializedcitiesdependmoreheavilyonrevenueprovidedfromgrantsanddistributionsfromstateandfederalsources.Figure47presentsinformationonthelevelofintergovernmentalrevenuespercapitaforeachofthe18municipalities.At$899and$703perresidentinintergovernmentalrevenue(2011and2012averaged)respectively,HammondandGaryleadthegroupbyasubstantialmargin.Conversely,therapidlygrowingcommunitiesofFishers,GreenwoodandNoblesvilleeachhadlessthan$100percapitainintergovernmentalrevenuesaveragedacrossthosetwoyears.

8ThedatapresentedinthissectionwasobtainedfromtheIndianaUniversityPublicPolicyInstitute’sFiscalBenchmarkingforIndiana’sLocalGovernmentsproject.

Whenviewedfromtheperspectiveofthepercentageoftotalrevenuefortheselectedmunicipalities,asimilarpatternemerges.AsillustratedinFigure48,oldercitiestendedtohavealowerpercentoftheiroverallrevenuesoriginatingfromon“own-source”revenuesthandidthecommunitiesexperiencingrapidgrowth.

HighwayFundingThemaintenanceandconstructionofstreetsandhighwaysisonemunicipalfunctioncommontoall18selectedcities.Thefinancialsupportofstategasolinetaxesremittedbacktomunicipalities(andcounties)throughtheMotorVehicleHighwayAccount(MVH)andtheLocalRoadandStreet(LR&S)

Fundhastraditionallyprovidedtheprimarysourceofrevenueforlocalgovernmentstosupportthisfunction.However,manymunicipalitieshavefounditnecessarytosupplementstategasolinetaxsupportwithothersources.Forexample,sevenofthe18municipalitiesstudiedherelevypropertytaxestosupporttheirrespectiveMVHFund.ManyutilizeCountyEconomicDevelopmentIncomeTaxrevenuestopartiallysupporttheirroadconstructionactivities.Ofthe18selectedmunicipalities,onlyGaryhadalowerlevelofactualMVH/LR&Sdistributionsin2014thanoccurredin2008.Figure49illustratestheactualchangebetween2008and2014fortheselectedmunicipalities.9Understandably,municipalitieswithgrowingboundariesand/orincreaseddevelopmentgainedmoreingasolinetaxdistributionsthanthoseexperiencingslowergrowth.Thisismerelyaresultofthedistributionformulasthatincludepopulationandroadmileage.Statewide,gasolinetaxdistributionstolocalgovernmentsincreasedby30.3percentbetweenthosetwoyears.Thecompositechangeforthe18selectedmunicipalitieswasasomewhatlower24.9percent.

AsisillustratedinFigure50,thecompositedistributiontothe18selectedcitieswaslesseveryyearbetween2009through2012thanthe2008compositedistribution.Afteradjustingforinflation,thiswasalsothecasein2013.However,theIndianaGeneralAssemblymadetwoimportantchangestotheMVHAccountbeginningwiththe2013-2015StateBudget.First,theportionoftheIndianaStatePoliceandotheroperatingdepartmentalbudgetsthathadbeentraditionallyfundedbygasolinetaxrevenueswereshiftedtotheGeneralFund.Secondly,onepercentofthestatesalestaxwasallocatedtotheMVHAccounttosupplementfueltaxrevenues.10ThisallowedforasignificantincreaseinstateappropriationsfordistributiontoboththeIndianaDepartmentofTransportationandtolocalgovernmentsthroughtheMVHAccount,47percentofwhichisallocatedtolocalunits.WiththisadditionalrevenuedirectedtotheMVHAccountinstatefiscalyear2014the2014,combinedMVHandLR&Sdistributionstothe18citiesincreasedbynearly$10millionoverthe2013distribution.The2014

9DataontheannualMotorVehicleHighwayAccountandtheLocalRoadandStreetFunddistributionswereprovidedbytheIndianaLocalTechnicalAssistanceProgram(LTAP)atPurdueUniversity.10FiscalImpactStatement#8toHouseEnrolledAct1001-2013

compositedistributionwas26percenthigherthanthe2008compositedistributionand15percenthigherthanthe2008distributionafteradjustingforinflation.

DebtInformationonmunicipaldebtobligationisnowavailableontheIndianaGatewayforLocalGovernmentwebsite.Whenpresentedasthelevelofdebtpercapitaforeachmunicipality,asisdoneinFigure50,itisagainobviousthatthereisconsiderablediscrepancyamongthe18selectedmunicipalities.TheCityofCarmel,withoutstandingtotaldebtof$10,484perresident,hasnearlytwicetheamountofoutstandingdebtpercapitathananyoftheothermunicipalities.AttheotherendofthespectrumistheCityofTerreHautewithoutstandingdebtof$309perresident.ItshouldbenotedthatTerreHaute,asdoseveralotheroftheselectedmunicipalities,hasaseparateSanitaryDistrictwhichalsocarriesdebt.Totaldebtaspresentedhereincludesalldebtissuedbytherespectivemunicipalities,includingthatsupportedbypropertytaxes,incometaxes,capturedtaxincrementrevenues,andutilityuserfees.InformationfortheCityofGarywasnotavailableonIndianaGatewayatthetimethisinformationwascollected.

Whenfactoringoutdebtassociatedwithtaxincrementfinancingandutilityuserfeerevenues,Carmel’slevelofoutstandingdebtcomparedwiththeothermunicipalitiesisevenmorepronounced.AsignificantportionofCarmel’snon-TIFandnon-utilitydebtissupportbyitsCountyOptionIncomeTaxrevenues.

Theuseoftaxincrementfinancingtosupportdebtalsovariesconsiderablyamongthe18municipalities.AsillustratedinFigure53,sixoftheselectedmunicipalitieshaveTIF-relateddebtobligationsinexcessof$1,000perresidentwhileeighthaveTIF-supportdebtobligationsoflessthan$500perresident.ThisdisparityintheuseofTIF-supporteddebtissimilartothedisparityinthepercentageofnetassessed

valuationcapturedinrespectiveTIFdistricts.Interestingly,whiletheCityofSouthBendhascapturednearly25percentofitsnetassessedvaluationinTIFdistricts,ithasoutstandingTIF-supporteddebtamongthelowerhalfoftheselectedmunicipalities.

Debttosupportwastewaterutilitycapitalneedsisasubstantialportionoftotalmunicipaldebtinmanyoftheselectedmunicipalities.Thismaybedue,atleastinpart,toactivitiesassociatedwithaddressingCombinedSewerOverflowissues.Insevenoftheselectedmunicipalities,wastewater-relateddebtrepresentsover50percenttototaloutstandingdebt.AsseeninFigure54,onlyinBloomington,CarmelandFishersdoesitrepresentlessthan20percentoftotaloutstandingdebt.

KeyObservationsCertainlythemoststrikingobservationisthewidespreaddisparityamongthe18selectedmunicipalitiesonnearlyeveryvariableconsideredinthisstudy.ThisdisparitymadeitmoredifficulttoidentifycommontrendsimpactingthefiscalhealthamongthisgroupoflargerIndianamunicipalgovernments.Italsounderscoreshoweachfacesitsownuniquesetoffinancialchallengesandopportunities.THECOMPOSITEECONOMICINDEXTheredoesappeartobeastrongcorrelationintherelationshipbetweentheeconomicenvironmentwithinwhichagivenmunicipalityisfunctioninganditsfiscalhealth.Therespectivemunicipality’srankorderontheEconomicIndexanditscorrespondingrankorderontheFiscalCapacityIndexisstrong(R-squaredcoefficientof0.739).Notsurprisingly,thefourselectedmunicipalitiesinthe“collar”countiesadjacenttoMarionCountyhavebeenoperatinginthemostadvantageouseconomicenvironments.Conversely,manufacturingcenters,oftendominatedbytheautomotiveindustry,tendtohavebeenoperatinginthemostchallengingeconomicclimates.CHANGESINASSESSEDVALUATIONAsignificantpercentage(25.5percent)ofgrossassessedvaluationisnowremovedfromthecompositetaxbasesofthesemunicipalitiesduetotheStandardandSupplementalHomesteadDeductions.Thisisnearlytwicethepercentagereduction(13.7percent)thatoccurredimmediatelybeforethe2008taxreformlegislation.Whilethisincreaseindeductionswascertainlybeneficialtohomeowners,itdidsetinmotionachainreactionof(1)reducingthenetassessedvaluationsoftheselectedmunicipalgovernments;(2)correspondinglyincreasingpropertytaxratesofboththemunicipalitiesandotherunitsofgovernmentthatsharedthesametaxbasesinordertomaintaintheirallowablecertifiedpropertytaxlevies;(3)theincreasedpropertytaxratesputmorepropertiesovertheirpropertytaxcaps;thus(4)furtherincreasingthelossofnetpropertytaxrevenuetothesemunicipalgovernmentsafterapplyingtheCircuitBreakerCredits.Grossassessedvaluationincreasedbetweenthestartoftherecessionandthe2008propertytaxreforms(2007pay2008)andthemostrecentdataavailable(2014pay2015)for16ofthe18selectedmunicipalities.Thecompositeincreasefortoentiregroupwasjustover14percent.However,overthesameperiod,netassessedvaluationdeclinedfor16ofthe18municipalities.Thecompositedecreaseinnetassessedvaluationwas11.4percent.Theratioofnettogrossassessedvaluationforthecompositeoftheselectedmunicipalitiesalsodroppedfrom70.7percentto61.5percentoverthisperiod.Assessedvaluesweremodestlygrowingbutfactorssuchasthechangeinhomesteaddeductionscausedeffectivetaxbasestoshrink.Thereductioninnetassessedvaluationin2008pay2009comparedwiththeprioryear,dueprimarilytotheincreaseinthehomesteaddeductions,wasnotfeltuniformlyacrossthe18municipalities.OnlytheCityofJeffersonvilledidnotexperiencealossfromtheprioryear’snetassessedvaluationandthatwasprobablymostattributabletotheconcurrentincreaseinassessedvalueduetoannexation.Elkhartexperiencedonlya2.7percentreductionwhileAndersonexperienceda24.7percentdeclineinnetassessedvalue–averylargedisparityinimpact.Thereisalsoawidevariationintheimpacttheuseoftaxincrementfinancinghashadonthegeneralfundtaxbaseofthese18municipalities.Twocities,JeffersonvilleandSouthBendhavecapturednearly25percentoftheirGeneralFundtaxbasewithinTIFdistrictswhilesevenoftheselectedmunicipalitieshavecapturedlessthantenpercentoftheirtaxbase.Thecompositepercentagewas12percentin2015,slightlymorethandoublethepercentagecapturedin2008.

PROPERTYTAXRATESThereissignificantdisparityinthepropertytaxratesdirectlyassociatedwiththe18selectedmunicipalities.Thisappearstobehistoricalinnature,ratherthanaphenomenonbroughtonbyeithertheGreatRecessionortherecentpropertytaxreforms.Itdid,however,placethosemunicipalitieswithhighratesandthosethatsharetaxbaseswithotherunitsthathaverelativelyhighrates,inthecross-hairsoftheCircuitBreakerCredits.PropertytaxrateshavecontinuedtoincreaseforallbutGaryandHammond.Whilenetassessedvaluationhasbeenrelativelyflatsince2010,themedianpropertytaxrateforthe18municipalitieshasbeengrowingsteadily.PROPERTYTAXLEVIESTheGreatRecessiondidreducetheinflation-adjustedcertifiedpropertytaxleviesfortheaggregateofthe18selectedmunicipalities.Intermsofrealpurchasingpower,thelowpointoccurredin2009(forthe2006-2015time-period).16ofthe18selectedmunicipalitiesexperiencedanincreaseintheirrespectivecertifiedleviesbetween2007(theyearbeforetheGreatRecession)and2015.Asisseeninmanyinstancesthroughoutthisstudy,thereisgreatvariationamongthe18municipalitieswhenleviesareviewedonapercapitabasis.13ofthe18municipalitiesincludedinthisstudyhadmaximumallowableleviessetabovethatstatewidegrowthquotient,indicatingthatmitigatingfactorssuchasannexationhadallowedtheirrespectivemaximumlevytobesetabovethelevelestablishedbythegrowthquotientalone.CIRCUITBREAKERCREDITSTheannualimpactoftheCircuitBreakerCreditsonthecompositeofthe18selectedmunicipalitiesgrewrapidlyintheyearsimmediatelyaftertheirenactment,fromacollective$30millionin2009toacollective$154millionin2013.Thecompositeimpacthasessentiallyleveledinthetwosubsequentyears.However,aswithsomanyvariables,theimpactofthepropertytaxcaprelatedrevenuelosseshascertainlynotbeenfeltuniformlyamongthesemunicipalities.WhiletheCityofMuncielost45percentofitcertifiedlevytoCircuitBreakerCreditsin2015theCityofBloomingtonlostlessthan1percentofitcertifiedlevy.LOCALINCOMETAXREVENUESLocalincometaxesareplayinganincreasinglyimportantroleinthefundingmixforourselectedmunicipalities.In2008,theaggregateofthese18municipalitiesderived23percentoftheir“coreincome”fromlocaloptionincometaxes.By2015thatproportionhadincreasedto30percent.ThisisdueinparttotheimpacttheCircuitBreakerCreditshaveplayedinreducingpropertytaxrevenuesandinparttothelocalincometaxratesthathavebeenincreasinginmanyoftheapplicablecounties.Thirteenofthe18selectedmunicipalitiesexperiencedatleastsomeincreaseintheirlocalincometaxdistributionsbetween2008and2015.THEFISCALCAPCITYINDEXTheFiscalCapacityIndexidentifiedsixofthe18selectedmunicipalitiesas“gainers”–thosewhose2015coreincomeexceededtheir2008coreincomeafteradjustingforinflation.ThesewereJeffersonville,Fishers,Carmel,Bloomington,LafayetteandFortWayne.Anotherthreefellintotothe“barelyfallingbehind”category,with2015corerevenueat99percentof2008inflationadjustedcorerevenue.Evansville,GreenwoodandNoblesvillewereinthiscategory.Threemore,Kokomo,ElkhartandNewAlbany,couldbecategorizedontheIndexas“modestlyfallingbehind.”Theyhad2015corerevenuebetween87percentand93percentof2008inflationadjustedcorerevenue.Finally,sixmunicipalities

fellintoa“concern”category,withaFiscalCapacityIndexoflessthan90percent.TheseincludedHammond,SouthBend,Anderson,TerreHaute,MuncieandGary.FUNDBALANCES,RECEIPTS,ANDEXPENDITURESSurprisingly,someofthemunicipalitiescategorizedbytheFiscalCapacityIndexaseither“modestlyfallingbehind”orof“concern”wereamongthefinanciallystrongestfromtheperspectiveofyear-endfundbalances.Inparticular,Elkhart(modestlyfallingbehind)andSouthBend(ofconcern)rankedasthetoptwomunicipalitiesfor2014combinedGeneralandRainyDayFundbalancesasapercentageofannualreceipts.TheCityofMuncie(ofconcern)rankedfifth-highestfromtheperspectiveoffundbalancesasapercentageofannualreceipts.Thisdemonstratesboththenecessityofexaminingmultipleindicatorswhenconsideringamunicipality’sfiscalhealthandthediversityofprofilesofferedbythe18selectedmunicipalities.INTERGOVERNMENTALREVENUESOldercentralcitiesinthegroupofselectedmunicipalitiesappear,ingeneral,tobemorereliantonintergovernmentalrevenuethandothenewer,suburbanmunicipalities.HammondandGarybothreceivedmorethan25percentoftheirannualtotalrevenuefromintergovernmentalgrantsandprogramsinanaveraged2011and2012time-frame.HIGHWAYFUNDINGThe2013changesmadeinappropriationstotheMotorVehicleHighwayAccount(MVH)–bothinremovingnon-highwayexpensesandinincreasingthepercentageofthestatesalestaxallocatedtotheAccount—havepositivelyaffectedthedistributionstotheselectedmunicipalities.The2014combinedMVH/LR&Sdistributionsexceedthosemadein2008evenafteradjustingforinflation,reversingatrendwhereannualdistributionswerenotkeepingpacewithinflation.DEBTThereisconsiderablediscrepancyintheamountofoutstandingdebtcarriedbyeachofthe18municipalities,rangingfrommorethan$10,000perresidenttolessthan$350perresident.Insevenofthe18municipalities,debtassociatedwithwastewaterutilitycapitalimprovementsaccountformorethanhalfofthatmunicipality’stotaloutstandingdebt.ConclusionsWhilerecognizingthateachmunicipalityhasitsownuniquefiscalstory,therearesomegeneralconclusionsthatcanbedrawnfromtheinformationassembledinthisstudy.

• Untilthispastyear,therehasbeenlittlenetassessedvaluegrowthinmanyoftheselectedmunicipalitiessincetheonsetoftheGreatRecessionandthishasexacerbatedthenegativeimpactoftheCircuitBreakerCreditsontheirfinances.

• TheCircuitBreakershavehadamajorfiscalimpactonolder,industrialcitiesandnotmuch

ofanimpactongrowingsuburbancitiesorthosewithauniversity-basedeconomy.

• LocaloptionincometaxeshavebecomeacriticalcomponentofmunicipalfinanceandappeartobeusedfrequentlytooffsettheimpactoftheCircuitBreakCredits.

• GeneralandRainyDayFundyear-endbalancesdonotalwayscorrelatewellwiththeFiscalCapacityIndex,withSouthBendandElkhartbeingextremeexamples.

• Itislikelythatthefiscalpositionsomeoftheolder,industrially-basedmunicipalitiesnow

findthemselveschallengedby,primarilyduetotheCircuitBreakerCredits,haditsrootsinthepropertytaxpoliciesinplaceunderdramaticallydifferentconditions.Strongindustrialtaxbasesfosteredapoliticalacceptanceofrelativelyhighpropertytaxrates.Thesehigherratesindirectlybecameinstitutionalizedbythelevycontrolsinstitutedinthe1970s.Formanymunicipalitiestakingthemaximumallowablelevywasthenorm,regardlessoftheresultingpropertytaxrate.Therecentlyenactedpropertytaxcapsmerelyexacerbatedtheproblemsforthosewithhighpropertytaxratesandsloweconomicgrowth.

However,averagesandcompositestatisticssimplydonottelltheentirestory.Therearesizabledisparitiesamongthemunicipalitiesincludedinthisstudywithregardtoassessedvaluegrowth,propertytaxrates,theimpactoftheincreaseinhomesteaddeductions,theimpactoftheCircuitBreakerCredits,useoftaxincrementfinancing,expenditurespercapitaandoverallfiscalhealth.Therefore,itishelpfultobrieflysummarizetheoverallimpactoneachofthe18selectedmunicipalities.Thecombinationoffactorsimpactingpropertytaxrevenues–increasedassessedvaluationdeductions,littletonogrowthinpropertyvalues,theCircuitBreakerCredits–intandemwiththerecession-inducedshorttermdeclineinincometaxrevenuehaveresultedinacumulativelossofcorerevenueineightofthe18selectedmunicipalities.Andthecumulativeeffectofrevenuelossesdoesmakeanimpact,particularlywhenamunicipalityiseitherslowtorespondwithconcurrentexpenditurereductionsand/orincreasesinalterativerevenuesourcessuchasutilizingthevarietyofincometaxoptionsnowavailable.Withoutsuchresponses,fundbalancescanbequicklydepletedinanattempttomaintainthestatusquo.Figure55illustratesthe2009to2015cumulativetotalofrevenuegainsorlossesincorerevenue(propertytaxlevieslesstherespectiveCircuitBreakerCreditsplusincometaxdistributions)comparedwith2008revenues.Theannualgainsorlosseshavenotbeenadjustedforinflation.

Thiscumulativegainorlossincorerevenueswhenexpressedasapercentageof2008corerevenuepaintsanevenmoreunderstandablepictureofthefiscalimpactoftheseeventsonmunicipalfinance,whichisillustratedinFigure56.

Inordertokeeppacewithinflation,amunicipalitywouldhaveneededacumulativegainincorerevenuebetween2009and2015of41percentof2008corerevenues.OnlythecitiesofJeffersonville,Fishers,Carmel,BloomingtonandEvansvillewereabletoexceedthatlevelofcumulativecorerevenuegrowth.Jeffersonvilledidsoprimarilythroughaggressiveannexation,butundoubtedlyalsohasincurredsubstantialnewobligationsontheexpendituresideoftheledger.CarmelandFishershave

bothbenefitedfromstrongbusinessandresidentialgrowthandhaveexperiencedverylittleCircuitBreakerCreditlosstotheirpropertytaxrevenues.Bloomingtonhasalsoenjoyedminimallossofcorerevenueduetothepropertytaxcaps.TheCityhaveEvansvillenotbenefitedfromanincreaseincountyincometaxratesandhasexperiencedsubstantialCircuitBreakerCreditlosses.Yetthemunicipalityhasmanagedtoexceedinflationoncumulativecorerevenuesbetween2009and2015.However,ithasreduceditscombinedyear-endbalanceintheGeneralandRainyDayfundsbyapproximately$6millionsince2008.Greenwood,Noblesville,KokomoandLafayettelostgroundtoinflationbutatleastdidnotexperiencenegativecumulativelossincorerevenues.GreenwoodandLafayettehadminimalCircuitBreakerCreditslosses(lessthan$30percapitain2015).Noblesville,whilesustainingmoderateCircuitBreakerlosses($90percapitain2015)hasbenefitedfromtheinincometaxrevenuerelatedtotherelativestronggrowthintotalpersonalincomeexperiencedinHamiltonCounty.HowardCountyhasadoptedthePropertyTaxReliefLOITat0.5percentsince2008whichhassofteneditsCircuitBreakerCreditlossfortheCityofKokomo.ElkhartandSouthBendhavealsobeenheavilyimpactedbytheCircuitbreakerCredits.Yetbothhavebeenabletonotonlysustain,butgrow,theirGeneralandRainyDayfundbalancesoverthe2009-2015period.BothElkhartandSt.JosephCountieshavealsorespondedbyadoptingboththePropertyTaxReliefandthePublicSafetyLOITs.ThecitiesofAnderson,MuncieandTerreHauteallhavebeenheavilyimpactedbythepropertytaxcaps,witheachhavinga2015percapitalossofover$160.MadisonCounty(Anderson)hassubsequentadoptedthePropertyTaxReliefLOITatthe0.5percentrateandthePublicSafetyLOITatthe0.25percentrate.NeitherDelawareCounty(Muncie)norVigoCounty(TerreHaute)hasrespondedwithanincreaseintheirrespectivelocalincometaxrates.Allthreeareincountiesthathaverelativeslowgrowthintotalpersonalincome,sounliketheHamiltonCountycommunities,levelincometaxratesarenotlikelytobeadequatetoappreciablyoffsettheCircuitBreakerCreditlosses.ThetwomunicipalitiesinLakeCounty,GaryandHammond,experiencesubstantiallossesincumulativecorerevenuesduebothtothelevelofCircuitBreakerCreditsthateachhasexperienced(GarymuchmoresothanHammond)andtheadditionalpropertytaxlevygrowthlimitationplacedonlocalgovernmentsinLakeCountyuntilthatCountyadoptedalocalincometax.IthassubsequentlyadoptedtheCountyEconomicDevelopmentIncomeTax,thePropertyTaxReliefLOITandthePublicSafetyLOIT,providingforbothareductionintheCircuitBreakerimpactandnetnewrevenuetoboththecitiesofGaryandHammond.TheCityofFortWaynehasalsoexperiencedsubstantialCircuitBreakerCreditlossesanddrewdownmoreGeneralFundandRainyDayFundbalancesbetween2008and2015thananyotherselectedmunicipality.Inresponse,withthemajorityofvotesintheAllenCountyIncomeTaxCouncil,itadoptedbothPropertyTaxReliefandPublicSafetyLOITsand,asaresult,wasablebringcorerevenuesbacktothe2008level.TheCityofNewAlbanylostgroundinbothrealandactualtermsoncumulativecorerevenuebutnotasbadlyassomeoftheselectedmunicipalities.ItexperiencedarelativelylowerCircuitBreakerimpactthanmanyofthesemunicipalitiesbuthasnotbenefitedfromanincreaseinincometaxratesandisinthemiddleofthepackontheFiscalCapacityIndex.YetNewAlbanywasabletoincreaseitsGeneralFundandRainyDayfundbalancesbyacombined$5.5millionbetween2008and2015.

The last chartpresented in this studypresentsa relatively simplisticmethod to summarize theentirestudy. Four factors–theEconomic Indexranking; theFiscalCapacity Indexranking;acombinationoftwo fund balance rankings (2009-2015 change inGeneral andRainyDay fund balances and the 2014GeneralFund/RainyDayFundbalancesasapercentof2014fundreceipts;andtherankingonthe2009-2015cumulativecorerevenuegain/lossasapercentageof2008corerevenuewerecombinedtocreateanoverallfiscalhealthrankingforthe18municipalities.

ThisOverallIndexreallyreinforcesthetrendsseenthroughthestudy.(1)Jeffersonvilleisaspecialcaseduetoitssignificantannexationsimpactingmuchoftherevenue-sidedatareliedupon;(2)the“collar”municipalitiesofCarmel,Fishers,GreenwoodandNoblesvilleappeartobedoingwell,atleastfromarevenueperspectivealthoughtheyalsohaveadditionaloperationalandcapitalexpensesattributabletothesubstantialgrowththeyareexperiencing;(3)theuniversitycitiesofBloomingtonandLafayettearealsoinarelativelygoodposition;(4)theLakeCountymunicipalitiesofGaryandHammondwerehithardbythecombinationoftheextraordinarylevygrowthlimitationplaceduponthembytheGeneralAssemblytoforceanenactmentofalocalincometax,theCircuitBreakerCreditlosses,particularlyinGary(duetoitshighpropertytaxrate)andrelativelydifficulteconomicconditions;(5)theolderindustrialcitiesofTerreHaute,Anderson,Muncie,SouthBend,FortWayne,NewAlbanyandElkhartallfacedacombinationofsignificantCircuitBreakerCreditlosses,slowerperforminglocaleconomies,andinsomecasesafailuretorespondtothepropertytaxcapswiththePropertytaxReliefandPublicSafetyLOITs;(6)bothEvansvilleandKokomohavefaredrelativelybetterthanexpected,particularlyEvansvillewithoutanincreaseinitslocalincometaxrates.

The18municipalitiesstudiedhereprovideessentialservicestoover1,400,000residents,nearlyone-quarterofthestate’spopulation.Theirabilitytocontinuetofunctionwithareasonabledegreeoffiscalstabilityisessential.Afewwerenotsignificantlyharmedbytherecessionorthepropertytaxcaps.Thereisevidencethatothersarefinallystartingtorecoverfromtheseeventsasnetassessedvaluesandcountywidetotalpersonalincomesarebeginningtogrowagain.Yetsomeremaininastateoffiscalconcernbasedoneitherasubstantialcumulativelossofcorerevenuesordepletedfundbalances.Itwill

beimportanttocontinuetomonitorthefiscalhealthinnextseveralyearsasthisstorycontinuestounfold.

report from indiana fiscal health policy institute

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