indiana department of local government finance1 clerk-treasurers conference department of local...

Indiana Department of Local Government FinanceIndiana Department of Local Government Finance 11

Clerk-Treasurers Conference

Department of Local Government Finance

Dan JonesAssistant Director, Budget Division

Fall 2010


Overview

2010 Budget Status 2011 Budget Outlook Budget and Property Tax Controls Exceptions to Controls Circuit Breakers 2010 Legislation On-Line Budget Program Q & A

DLGF Responsibilities

Ensures property tax assessment and local government budgeting carried out in accordance with State law

Publishes property tax assessment rules Annually reviews and certifies tax rates, budgets

and levies of every political subdivision in State– includes all counties, cities, towns, townships, school

corporations, libraries, and other entities.


2010 Budget Status

85 counties billed “on-time” – May 10 due date– First time since 2002– 87 budget orders issued by late March– 2 counties issued provisional bills

91 counties should distribute final property tax distributions by 12/31


2011 Budget Outlook

Goal: On-time billing in 91 counties Received NAVs from 67 counties

– only 17 received as of last year at this time Budget review begins in November.

– Processing additional appropriations until Dec. 15th– May schedule public hearings before 1782’s

issued.. Many counties will have Budget Orders before

Jan 1st!Indiana Department of Local Government FinanceIndiana Department of Local Government Finance 55

2011 Budget Update

2011 NAVs slightly below 2010 values Income tax distributions for 2011 lower

– based on collections from 2009 Little change in most tax rates and levies from

2009 to 2010 Reassessment began July 1st

– Completion and effective date: March 1, 2012– Will show for taxes due and payable in 2013


2011 Budget Reminders

TIF neutralizations must be submitted before NAVs can be certified.

Submit only the signed TIF neutralization forms– Will not process unless signed forms received– Include TIF district name at bottom of form.

Normally processed and approved the same day received.



Budget and Property Tax Controls: Overview

Budgets: financial plans that include both revenues and expense over a specific period of time

Budget Approval: provides the units with authority to “spend” and approve taxes to support spending.– First by locally elected or appointed officials– Then by the DLGF

Budget and Property Tax Controls: Local Role

County councils required to make “non-binding recommendations” to units with elected fiscal bodies that levy a property tax. (IC 6-1.1-17-3.5)

County councils adopt budgets for units with appointed fiscal bodies if budgets increase more than the AVGQ.

Failure to comply with above results in a “frozen” budget and levy for the next year.


Budget and Property Tax Controls:DLGF Role

Reviews and modifies tax-supported funds to remain within parameters of law.

Increases allowed as long as they are within the maximum levy.

Certifies the budget, tax rate and tax levy for tax-supported funds.


Budget Controls

September 17 was last day to submit budget to county for “non-binding” review– 45 days before civil taxing unit is to adopt the

budget, rate, and levy October 15 is last day for county council to

complete review and issue “non-binding recommendation.”

County council determines the format of budget to submit and the date of review.


Levy Controls

With a few exceptions, maximum levies may increase by the statewide average growth in non-farm personal income. (Excludes years of reassessment, first year of trending 2006 pay 2007, and 2008 pay 2009 for new Homestead Deduction.)

Debt service fund and cumulative capital development funds (CCD only) outside of maximum levy controls. – Debt service = “need based” – Cumulative funds = “rate controlled”


Adjustments to Maximum Levy

HEA 1086-2010 allows the DLGF to adjust maximum levies if a unit was below their max in the previous year– Unit must request before Sept. 30, 2010– Unit’s actual cash balance must have decreased due

to lower levy (below maximum allowed)– Adjustment is less than or equal to amount of cash

used– Reduction was not result of transfer to Rainy Day

Fund Indiana Department of Local Government FinanceIndiana Department of Local Government Finance 1313

Exceptions to Levy Controls

Cumulative Capital Development Funds are outside of maximum levy controls if at 1984 levels(Max rate of 0.05 in “adopting” and 0.04 in “non-adopting” counties)

Cities and Towns may adopt a combination of cumulative funds, but only total rate up to 0.0167 is outside max if no CCD (0.0167 in adopting and 0.0133 in “non-adopting counties)

Property tax levies and rates adjusted for trending Cumulative Fund must be re-established to increase

the tax rate Indiana Department of Local Government FinanceIndiana Department of Local Government Finance 1414

Cumulative Funds Available to Cumulative Funds Available to CitiesCities

Fund: Indiana Code Max Rate

Cum. Capital Development 36-9-15.5-1 0.0500

Cum. Capital Improvement 36-9-16 0.3300

Cum. Building 36-9-16-1 0.3300

Cum. Building Park 36-10-3-21 0.0167

Cum. Bridge 8-16-3-3 0.1000

Cum. Transportation 36-9-4-48 0.0667

Cum. Drainage 36-9-27-100 0.0500



Excessive Levy Appeals Available (5)– Extension of Services / Annexation /

Consolidation– Emergency– Three-Year Growth– Correction of Advertising or Math Error– Shortfall (not caused by Circuit Breaker)

Subject to DLGF approvalIndiana Department of Local Government FinanceIndiana Department of Local Government Finance 1616


Appeals must be included in annual budget and advertised as an excessive levy appeal

Fiscal body must include with budget adoption or may be a separate ordinance/resolution

Units must file an application by October 20 unless for shortfall appeal– Shortfall appeals may be filed until December 30

Later filings may delay Budget Order!


Circuit Breakers

“Property Tax Caps” Limit taxpayers’ liability for property taxes to

percent of gross assessed value of taxable property:– 1% for homesteads (primary residence)– 2% for non-homestead residential and agricultural– 3% for commercial & industrial

Constitutional question on November ballot


Circuit Breakers

Property tax liability may increase up to cap when property values increase – If value increases from $100,000 to $150,000, liability

may increase from $1,000 to $1,500 Circuit breaker credits cannot be recovered by

increasing property taxes


Circuit Breaker Credit ImpactSource: 2010 Abstract of Taxes Charged

Unit Type Circuit Breaker Credit

Total Certified

Levy

% of Certified

Levy

Counties $48,826,482 $1,129,711,463

4.3%

Cities & Towns

108,876,685 1,357,424,545 8.0%

Townships 10,930,067 227,500,621 4.8%

School Corp. 129,323,193 2,636,925,475 4.9%

Libraries 14,093,767 277,035,387 5.1%

Special Dist.*

26,564,997 413,684,589 6.4%

Totals $338,615,191 $6,042,282,080

5.6%

*Includes Fire Territories and Districts, Airport Authorities, Solid Waste Dist., Transit Authorities, Sanit., and Indpls. Spec. Svc. Dist.

Indiana Department of Local Government FinanceIndiana Department of Local Government Finance2020

Circuit Breaker

Credits are proportionately distributed to ALL funds (except exempt) on basis of their certified rate.

If a debt service fund is affected by credits, the unit must fulfill debt obligation by using other funds.– Units (except schools) not permitted to transfer funds to a debt

fund from other funds – Must appropriate monies from other funds to pay the shortage– State permitted to withhold LOIT shares to fulfill debt obligation

(May 5, 2010 Memo.)2121

Circuit Breakers

Debt Service Funds affected by Circuit Breaker Credits:– Most units will have sufficient operating balances in

debt funds to cover shortages– Offers most flexibility to units of government by

allowing unit to choose how to cover debt fund shortages, if they occur

Exempt: Construction, school operating levies, and pre-July 2008 debt service in Lake and St. Joseph counties are exempt


Sample Circuit Breaker Calculation: Sample Circuit Breaker Calculation: Homestead PropertyHomestead Property


Gross Assessed Value $100,000Deductions $64,250Net Assessed Value $35,750Tax Rate 4.0000Gross Tax Bill $1,430Credits $200Net Tax Bill $1,230Cap (1% times $100,000) $1,000Circuit Breaker Credit $230Final Tax Bill ($1,230-$230) $1,000

Sample Circuit Breaker Calculation: Sample Circuit Breaker Calculation: Commercial PropertyCommercial Property


Gross Assessed Value $100,000Deductions $0Net Assessed Value $100,000Tax Rate 4.0000Gross Tax Bill $4,000Credits $0Net Tax Bill $4,000Cap (3% times $100,000) $3,000Circuit Breaker Credit $1,000Final Tax Bill ($4,000-$1,000) $3,000

Circuit Breaker kicks in when….

Total of all tax rates in a tax district exceed circuit breaker threshold

Large amount of property tax supported funds Large amount of debt supported by property tax Large amounts of property values captured for

TIF


Property Tax Trend

National trend: Reduce tax burden on property owners

Percentage of Local Revenue From Property Tax1999 44.2%1997 45.3%1987 45.9%1977 59.0%1967 66.2%

Source: U.S. Census Bureau, Census of Governments, available at http://www.census.gov



Tax Policy

IAAO Property Tax Policy Course 402– Coarse is offered several times a year in

different venues throughout Indiana GFOA

– Best Practices in Budgeting and Fiscal Policy Focus on revenue diversification Increased use of user fees www.gfoa.org


New Legislation

SEA 281– Section 5 requires cities and towns to provide law enforcement

with body armor– Section 9 allows the unit to use CCI fund to purchase body

armor.

New Legislation

HB 1086 – – Sec 36: A public question to issue debt for a

controlled project is to be approved by the election board and submitted to the DLGF for review and recommendation.

The final language to appear on the ballot is determined by the election board. IC 6-1.1-20-3.6 (Effective upon passage)

– Sec. 61: Fiscal bodies now have until before Nov. 1 to adopt, rescind, or increase LOIT tax rates.

Also changes the effective dates.


New Legislation

HEA 1086 Section 61HEA 1086 Section 61

New Effective Dates for local option income taxesNew Effective Dates for local option income taxesImposes or increases an income tax or tax rate:Imposes or increases an income tax or tax rate:

Ordinance Adoption Date:Ordinance Adoption Date: Effective Date: Effective Date: Before Oct 1Before Oct 1 Oct 1Oct 1 Before Oct 16Before Oct 16thth Nov 1Nov 1 After Oct 15 and before Nov 1After Oct 15 and before Nov 1 Dec 1Dec 1


New Legislation

New Effective Dates for local option income taxesNew Effective Dates for local option income taxesRescinds or decreases an income tax or tax rate:Rescinds or decreases an income tax or tax rate:

Ordinance Adoption Date:Ordinance Adoption Date: Effective Date:Effective Date: Before Oct 1Before Oct 1 Oct. 1 or 1Oct. 1 or 1stst day of month day of month

in which it was last in which it was last increased increased or imposedor imposed

After Sept. 30 and before Oct. 16After Sept. 30 and before Oct. 16 Nov. 1 or 1Nov. 1 or 1stst day of month in day of month in which it was last increased or which it was last increased or imposedimposed

After Oct. 15 and before Nov. 1After Oct. 15 and before Nov. 1 Dec. 1Dec. 1


New Legislation

Sec. 69 and 152: – Amends uses of Cumulative Capital Improvement

Fund for cities and towns to include “any governmental purpose for which money is appropriated by the fiscal body of the city or town.”

– Sec. 152: A municipality may establish a cumulative capital improvement fund for a purpose described in IC 6-7-1-31.1.


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Gateway: Online Budget Program

Development of online portal– 3 budget forms

Form 1, Form 2, Form 4B– Automatic load for reporting utilities

Piloting in 7 counties (178 units) Schools to come online in two years

Annual report to SBoA filed electronically

Indiana Department of Local Government FinanceIndiana Department of Local Government Finance


For More Information

Dan Jones, Assistant Budget Division Director– Telephone: 317-232-0651– Email: [email protected]

News releases from the DLGF– www.in.gov/dlgf

Contact the DLGF– 317.232.3777– “Contact Us”: www.in.gov/dlgf/2338.htm

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