By JOHN KLINE email@example.com
---- — GOSHEN — Elkhart County Council members Saturday gave their blessing to the exploration of a several new taxing options for the county in the hopes of finding a way to minimize the county’s ongoing losses in property tax revenue resulting from the state’s Circuit Breaker Property Tax Credits.
During Saturday’s meeting, County Commissioner Mike Yoder went before the council as a representative of what has come to be known as the Intergovernmental Forum, a small group of local legislators whose members include county commissioners, county council members, county planning and redevelopment department officials, as well as several representatives from Elkhart and Goshen city government.
According to Yoder, the group over the past few months has been examining the current and future impacts of the circuit breaker tax credits on Elkhart County, and has determined that the county has actually been hit harder than most counties in the state when it comes to losses in tax revenue.
“Frankly, many counties around the state are now doing OK,” Yoder said. “The economy has recovered a little more strongly in those communities. Elkhart County is beginning to stick out a little more as one that is struggling to overcome the circuit breaker credits specifically.”
As an example, Yoder pointed to a recent study by the financial advising firm Umbaugh and Associates indicating that the county will likely continue to face funding shortfalls in the range of $4 to $6 million every year for the foreseeable future unless a new revenue source is found.
“At some point, we have to face the reality that we’re not going to recover as quickly as we wanted,” Yoder said.
As things stand now, Yoder noted that the county currently only has three options available when it comes to local income tax options provided by the General Assembly, none of which he thinks are very good. Those options include:
• One: Increasing the existing Local Option Income Tax by 1 percent, which he said would generate property tax relief, and thus reduce the circuit breaker losses somewhat.
• Two: Passing a property tax levy freeze, which would limit growth in property taxes levied by funding the increases with a local income tax of up to 1 percent.
• Three: If the county passes one of the first two options, it then has the option to establish a Public Safety Income Tax which would provide a local income tax of up to 0.25 percent to fund public safety costs.
However, Yoder noted that the Umbaugh report indicated that the county would need to do at least a 1.25 percent income tax increase to even begin to approach recovering from the circuit breaker losses.
“And I don’t think anybody believes that we can stand an almost doubling of our local income tax,” Yoder said. “But we don’t have any other options.”
That said, Yoder noted that he and the Intergovernmental Forum have come up with several ideas for new tax revenue that could potentially help shore up that funding gap.
The first option mentioned by Yoder involves creating a countywide Food and Beverage Tax which would be collected countywide and then distributed back to each county unit based on the county’s current Economic Development Income Tax (EDIT) formula.
“The purpose of this tax would be pretty broad-based,” Yoder said, “and would be for whatever the council would choose as a legal, general fund purpose.”
The second option, and the one he favors most, would be the creation of what he called a Circuit Breaker Relief LOIT.
“The way this would work is it would be a variable rate tax maximized at 1 percent, and that rate would be determined on the total circuit breaker losses for that coming year,” Yoder said. “As it happens to work out, this year our total circuit breaker losses in Elkhart County are $37 million. A 1 percent LOIT raises right at $37 million. Next year, if the circuit breaker losses were lower, that LOIT rate would be lower.
“So if we truly grow out of this, then that tax would go away,” he continued. “So rather than the current option of a permanent tax, this is one that meets our needs right now and helps us transition to a time when, perhaps in 10 years or so, we have overcome these circuit breaker losses.”
Yoder noted that currently the only way to enact either of the two proposed tax options is to first get permission from the state Legislature. That, he said, is why he chose to seek the council’s favor in pursuing the two tax options Saturday.
“I’m asking you today to support this generally in concept so that we can go to our legislators and ask for some enabling legislation to allow us this additional option,” Yoder said.
While acknowledging the fact that the county does need to do something to make up its revenue shortfalls, several on the council questioned how the county can get the public to throw its support behind a tax that many may see as simply replacing any money they may be saving through the property tax caps.
“It’s the job of the taxpayers to complain about the tax rates. It’s our job to fully fund, adequately fund, county government,” Yoder said in response. “And in most cases, what we do has to be done. And we don’t have many options. So that’s the balance. There’s always going to be that pressure to keep tax rates down, and I think we share that goal. On the other hand, there is the obligation and the responsibility we have. That’s a pretty big responsibility. So we’re looking for additional options.”
While not yet ready to rule one way or the other on any particular option, the council did agree that the county should at least have the option to look at additional ways to make up the funding shortfalls created by the circuit breaker tax credits.
Along those lines, the council voted unanimously to throw its support behind the Intergovernmental Forum’s plans to go to the state Legislature with its recommendations for additional LOIT options.
“I think we’re going to be able to create a pretty compelling argument that Elkhart County has some particular problems,” Yoder said.
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