Friday, October 26, 2007

March of the Strawmen

How much did Marion Co. lose from the elimination of the Business Inventory Tax?

The loss of the revenues generated by the business inventory tax has been cited as one of the contributing factors in the need to raise property tax rates. How much did we actually lose? I called the Marion Co. Treasurer's Office on Oct. 25 2007, and spoke to someone who identified herself as Sue who told me that she had been instructed to tell inquirers that in 2006 $48 million had been collected. Attempts by myself and others to confirm this figure on Oct. 26, 2007 were unsuccessful. However, the following exert from the Metropolitan Development Committee meeting of Aug. 13th suggests that this may indeed be a reasonable estimate. $48 million represents about 3.5% of the total levy for 2006. (see following post for amount of 2006 levy).

DATE: August 13, 2007
CALLED TO ORDER: 5:30 p.m.
ADJOURNED: 7:05 p.m.
Attending Members Absent Members
Dane Mahern, Chairman
Rozelle Boyd
Ron Gibson
Scott Keller
Lance Langsford
Robert Lutz
Angela Mansfield
Jackie Nytes
Marilyn Pfisterer

Robert Clifford, City Controller made opening remarks and gave an overview of the proposed 2008 budget. Some key points are as follows:
Goals for 2008 budget are to reduce property taxes, prioritize spending for public safety in crime prevention and initiatives, fund pre-1977 police and fire pensions, minimize cash flow problems caused by re-assessment, etc.
Challenges in the budget are last year’s shortfalls, spending down fund balances in 2007, and requests exceeding revenues (i.e. Information Service Agency (ISA) request for a $12 million increase), state mandates, etc.
Property tax levy reductions in the amount of $50.4 million: County Cumulative Fund reduced by $600,000, Child Services Debt budget is relatively flat in 2008 and levy can be decreased, Tax Increment Finances (TIFs) are healthy and do not need to collect all the money, seven million dollar reduction in the Redevelopment Debt, etc.

Metropolitan Development Committee
August 13, 2007
Page 4

Property tax levy is frozen due to the increase in County Option Income Tax (COIT) being passed.
The City property tax levy has actually declined over the past eight years and the Council has already made improvements with property tax dollars with the consolidation of Warren and Washington Township Fire Departments.
The City’s portion of the property tax rate is less than 25% and will continue to decrease.
The County represents nine percent of the total levy in the county, and that nine percent keeps people in jail, sends out warrants, and runs the court and the criminal justice system.
2008 challenges: $20 million of the $35 million in COIT notes have to be paid back in 2008, labor contracts, fuel, rent for city and county increase.
There is no borrowing currently required to fund the 2008 budget.
The timing of property tax collection for 2007 and 2008 will have an effect on the cash flow for the city and county budgets (approximately $52 million).
Councillor Mansfield asked for clarification on why there is a cash flow crisis. Mr. Clifford said the Governor has ordered that 2007 property taxes be paid at the 2006 level and in 2006 there was $132 million less in taxes levied The percentage of the total levies has decreased two percent in 2007; therefore, two percent of the $132 million will be lost revenue. He said the second problem is businesses do not pay inventory tax, which is five or six percent of the county levy that is lost.
Mmoja Ajabu, Minister of Social Concerns, said he is concerned with the way the city determines the budget. He said they decide how much money they would like to spend, then come to the tax payers for the money. Minister Ajabu said the city should look at the revenue coming-in and then decide how money is spent. Bart Brown, Council’s Chief Financial Officer, said the Controller looks at the fixed revenue available before looking at the budget request. Mr. Clifford said the rules for property tax assessment are done by the state, and the city can only do what the state provides them by law.

So 3.5 -6 % loss of revenue justifies massive increases in the property tax rates? I don't think so.

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