|
3-27-03
Can We Fund Local Government Without
Property Tax Assessments?
Your property tax rate changes every year. That's because local units
fix the revenue that they'll receive from the property tax first, and
then set the rate so they'll collect that amount from the tax base. And
that is a problem for the Indiana property tax in 2003.
The tax base is the assessed value of taxable property. Back in December
1998, the Indiana Supreme Court found the assessment rules that we've
used up until now to be unconstitutional. After that, it took the state
a long time to come up with constitutional rules. The counties got a late
start on this reassessment, and there's a lot to learn. The reassessment
was supposed to be done last year, but none of the counties made it. By
the end of March 2002, only a few counties had finished.
The Department of Local Government Finance is the state agency that oversees
the reassessment. It did a survey at the end of 2003 and found that just
44 of the 92 counties expected to send out their "Form 11s"
by the end of May (you can see the press release online at http://www.ai.org/dlgf/.
Form 11s are the notices sent to property owners showing them their new
assessments. They're sent when the reassessment is done.
Here's the problem. If there are no assessed values, tax rates can't
be calculated. If there are no tax rates, tax bills can't be mailed. If
tax bills aren't mailed, taxpayers can't pay their property taxes. And
if taxpayers can't pay their property taxes, counties, cities, school
districts and other local governments won't have the revenue they need
to deliver services.
Property tax payments are made in two equal installments. The first usually
is due on May 10. It looks like less than half the counties will have
their assessments done by then, let alone the tax bills mailed. The revenue
from these tax payments is usually distributed to local governments in
June. In most places, it won't be this time.
Local governments won't shut down. Instead, they'll issue "revenue
anticipation notes." That means they'll borrow the money for a short
time, promising the lenders (banks and bond buyers) that they'll repay
when property tax revenues arrive. Repay, plus interest, of course. That
interest will be an extra expense for local governments. If more than
half the counties miss the tax bill deadline, the added interest payments
could easily total tens of millions statewide.
Or maybe not. The General Assembly is considering a bill, House Bill
1219, that could help. You can read it at http://www.in.gov/apps/lsa/session/billwatch/billinfo by typing "1219" into the "Go To Bill" box. Or try
reading the fiscal note for a nice summary of what the bill does.
HB1219 lets county treasurers send out provisional tax bills equal to
95 percent of what the taxpayer paid in 2002. Once assessments are finished
and tax rates are calculated, the treasurer will send a reconciling statement
to each taxpayer. If the actual tax bill is more than the provisional
bill, the taxpayer will pay the difference. If the actual bill is less
than the provisional bill, the treasurer will refund the difference, or
simply reduce the taxpayer's bill the following year.
This will be costly for the treasurer's office. It will take extra time
to compare the provisional tax bills to the actual tax bills, and extra
money for printing and postage to send out the reconciling statements.
The treasurer in each county will have to decide whether the added administrative
costs would be less than the added interest on all that borrowing. My
guess is that the borrowing would be way more expensive.
House Bill 1219 passed the House unanimously on Feb. 17. The Senate Finance
Committee passed an amended version unanimously on March 21. If the full
Senate approves, then the House must either agree to the amendments, or
both houses must work out a compromise in a conference committee. So far,
at least, no one has objected.
Looks like the county treasurers soon may have a decision to make. And,
perhaps, Indiana local governments will save millions in interest payments.
|
