• 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.