Goshen News, Goshen, IN

Local News

April 15, 2012

Little fanfare in budgeting tax revenues

GOSHEN — Looking back when her office learned last week that more than $5 million would soon be returned to local taxing units, Elkhart County Auditor Pauline Graff’s reaction was not one of glee.

While some would think such an unexpected lump sum would elicit a woo-hoo moment of sorts, it was more of an ah-ha moment for Graff.

That’s because Graff said she questioned the state’s revenue estimates last year when she heard the calculations that have since been proven wrong.

“We had asked them at that point, are you positive? This doesn’t look right,” Graff said. “At that point, (they said) ‘no, no we’re right.’

“I feel more confident in the fact when I was calculating all of this last year, I probably came closer to what they said plus what they are giving us now.”

Word of the unexpected funds came after state officials admitted an accounting error at the state level that shortchanged local taxing units by about $206 million from this year and 2011.

Elkhart and Indiana’s other 91 counties have already received their share of the $206 million and are now preparing to disperse the revenues to each of the local taxing units — including the cities of Elkhart, Goshen, a handful of towns, schools, townships, libraries and the county itself.

On Thursday, Graff’s office began notifying local taxing units how much they can expect to receive.

Revenues from the state are distributed monthly. Graff said the totals include money owed from last year and for the first four months of this year.

Little exuberance

While the unexpected revenues might be as rare as a plummeting tax rate, there still is little exuberance in deciding what to do with the money from Graff’s perspective.

Graff said the county had planned to use Rainy Day Funds or revenues from EDIT to cover the anticipated shortfalls.

Now that the money will be made up, she said the $2.3 million in additional money will be put into the county’s general fund account.

“It’s not like it is any big windfall for us,” Graff said. “It’s just helping to balance the budget without having to use our special (reserve) funds.”

The city of Goshen will receive $482,244 in revenues for 2011 and the first part of 2012, according to figures released by the auditor’s office.

Mayor Allan Kauffman said the money will be placed in the city’s general fund and some of it will go into the city’s Economic Development Income Tax fund.

“It’s not a great enough amount of money that we can plan to spend it six different ways,” Kauffman said.

Unless the state mandates where the money must go, Kauffman added, “We’re just going to put it back in the funds where it belonged and it will be part of the operating balance.”

Goshen Public Library is expected to receive nearly $46,000. Goshen Community Schools will receive $64,198.

The city of Nappanee will receive $119,233 while Middlebury will be able to deposit $62,349, according to figures released by the county.

Another error

The disclosure marks the second major budgetary miscue in the past year and some lawmakers have called for an investigation into the latest error.

Soon after the announcement last week, the state’s top revenue official resigned.

Meanwhile, the error has prompted some calls for changes in the way the funds are collected.

Kauffman sent an e-mail to council members informing them that local elected officials across the state are contacting state legislators suggesting “this latest snafu is a clarion call” for county collection of Local Option Income Taxes (LOITs).

He said several state lawmakers had expressed support for the idea.

Kauffman said the Indiana Association of Cities and Towns asked for legislation in the 2012 session for local collection, but the bill was not heard. Other states allow local collection of LOITs, he said.

Under the current state collection system, Kauffman said, it is a two-year delay from the time the income tax is deducted from paychecks until it is returned to local counties.

“If counties collected LOITs, it probably wouldn’t take two years,” Kauffman told council members. “And even if it did, at least the money is held locally, helping local cash flows instead of the state’s.”

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