Capital expenditures frozen as officials wait for state guidance
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The Indiana State Legislature took aggressive action this year to drastically reform property taxation with the passage of Senate Bill 1. Unfortunately, no one seems to know just how the changes will affect local units of government.
From counties, cities, and townships to schools, libraries, and recycling districts, there is great concern about how funding will be altered, how much revenue will be lost or need to be replaced with different taxes, and what services and projects will be delayed or eliminated altogether.
With no information in hand and no indication when the state might provide guidance on the impact of its actions, some local government leaders are embracing austerity. This month, the Howard County Board of Commissioners opted to “pause” all capital projects involving property tax revenue.
On May 5, Commissioner Jeff Lipinski introduced the pause with the support of his fellow commissioners.
“I would move that the Howard County Commissioners put a temporary halt on all industrial and commercial projects,” said Lipinski. “Howard County, like all taxing units in Indiana is extremely concerned with the effects that Senate Bill 1 will have on county operations and finances now and in the future.
“We have consulted for several weeks now with the county's financial advisors and other experts as to what impact will be felt by Howard County and the taxpayers from this bill. Despite the county's due diligence, the impact is still uncertain, and there are many unknowns. We have yet to receive a definite answer on the bill’s impact.”
Commissioner Brad Bray agreed with the assessment and gave his support to “just take a breath and put a hold on things.”
Commissioner Jack Dodd added his support, expressing frustration and concern about the lack of information coming from legislators and state officials about the matter.
“Not knowing what the impact is going to be, this move is prudent, I guess, until we get a better understanding,” said Dodd. “We hear things from one group or another … everything is different. This is a prudent move on our part, in the interest of all Howard County residents, until we get a better understanding.”
Dodd explained that no resolution was made, and the commissioners took no vote. They simply agreed to take an executive action and stop the expenditures. Lipinski stressed that the pause affects any project that utilizes property tax revenue, with the exception of the project to construct a new county jail, since that project is mandated by court order. It was a move that received the endorsement of Howard County Attorney Alan Wilson.
“I don't think the commissioners really have a choice,” said Wilson. “There are many important decisions that have to be made, but you don't have the information right now.”
Unfortunately, the commissioners were no better informed two weeks later at their meeting on May 19. At that time, Lipinski asked Howard County Auditor Jessica Secrease if any guidance had been received from the state to help local government understand the impact of SB1.
County auditors are responsible for overseeing much of the taxation process in Indiana. They receive property values from the county assessors and then apply the tax rates to determine what residents will pay. Unfortunately, Secrease disclosed that nothing has been provided by the state to the county auditors, but she was hopeful that they may know something by July.
This didn’t sit well with Lipinski, who offered to try to speed up the process by hosting an information session for the state in Howard County. Dodd added that county commissioners across the state are no better informed. Everyone remains in the dark about the state’s tax changes.
“I have been involved with the Indiana Association of County Commissioners, and we're in the same boat,” said Dodd. “We keep working on trying to understand all the fiscal impact to the different counties from Senate Bill 1. It is confusing. As we get more information, we'll try to share that.”
Locally, the spending pause won’t be felt too acutely for the time being. The county is moving forward with the small concrete replacement project around the Howard County Courthouse and the development of parking lot at Mulberry and Union streets where the Firestone building once stood.
However, the planned solar farm in eastern Howard County will be affected. The project already had hit a wall with the Howard County Drainage Board concerning a regulated drain serving the project that is in need of repair. The spending freeze only makes that project less likely to come to fruition.