The bill contained numerous provisions aimed at providing Hoosiers relief on their property tax bills, but unfortunately also contained significant changes to Indiana’s property tax system. Despite the hard work of your ITA Legislative Team, the legislature saw fit to eliminate the assessing duties of trustee-assessors.

You will recall that elimination of township assessing officials has been a priority for some in the legislature over the last several years, but each year prior we had successfully fought off those attempts. However, with this issue being a key component of the Governor’s tax reform agenda and with the Kernan-Shepard also endorsing a single county assessor, the odds were overwhelmingly stacked against us this session and were simply too great to overcome.

That is not to say that we did not enjoy significant support among certain legislators. The following legislators were especially vocal in their support for maintaining the role of trustee-assessors in Indiana’s assessment system:

Senator Jim Arnold
Senator Bob Deig
Senator Dennis Kruse
Senator Sue Landske
Senator Ryan Mishler
Senator Tim Skinner
Senator R. Michael Young
Rep. Russ Stilwell
Rep. Jackie Walorski
Rep. Kreg Battles
Rep. Bruce Borders
Rep. Jim Buck
Rep. Dale Grubb
Rep. Ron Herrell
Rep. Dennie Oxley
Rep. Milo Smith

In all honesty, it was through the support of these legislators, the diligence of your lobbying team, and through your phone calls, emails, and contacts with your elected officials that maintaining township assessing was even a possibility during the last several weeks of session. Numerous sources within the General Assembly, friends and foes alike, informed us that given the current political climate and the call for property tax reform that began last summer, there was little to no chance of us retaining assessing duties.

You will recall that the firestorm hit shortly after the legislature adjourned last year, when homeowners in certain areas of the State, most notably the Meridian-Kessler area in Marion County, experienced significant increases in their property tax bills that were not offset by the tax rebates approved by the legislature during the ’07 session. In response, the Governor assembled the Kernan-Shepard Commission to examine Indiana’s local government system, and the Commission on State Tax and Financing Policy, chaired by Senator Luke Kenley, also discussed Indiana’s tax climate. The ITA was represented at every meeting these two commissions held and provided testimony in support of township assessing.

Those two bodies ultimately recommended sweeping changes to Indiana’s tax structure, including the consolidation of tax assessment duties at the county level. The Governor also unveiled his agenda for the 2008 session late last year, which included the transfer of assessing duties to an appointed rather than elected county assessor.

Because the legislature intended to tackle this monumental task during the “short” legislative session, hearings were held in December on the tax proposals. The House of Representatives included the Governor’s entire tax plan in HB 1001 and held meetings throughout the state to allow for public input, while the Senate split the proposal into several different bills. SB 16 originally called for the transfer of assessing duties from township assessors to the county assessor. We were again present to provide testimony at all committee meetings in support of township assessing.

We knew that our best chances at success was to isolate the assessing issue from the other tax relief provisions of the Governor’s plan, so we focused our efforts on SB 16. After falling one vote short of killing the bill in Committee, we firmly believe that we had the bill effectively killed on the Senate floor, as our tally sheet showed only 21 “yes” votes with 26 necessary to pass the bill. Realizing this, the bill’s author took the unusual step of calling the bill back to 2nd Reading to allow for an amendment that would only eliminate township assessors with less than 15,000 real property parcels. Despite our opposition, the change gained enough votes for the Senate to approve it 29-18.

It soon became clear that SB 16 was not going to receive a hearing in the House, so our focus turned to HB 1001 that had already passed the House in an expedited fashion and was now being considered by the Senate. The version passing the Senate committee also contained the 15,000 parcel threshold, and we knew that we’d be unable to defeat the entire property tax relief plan, so we instead offered an amendment of our own as an alternative.

Senator Sue Landske (R-Cedar Lake) offered to carry an amendment on our behalf that would call for township-bytownship referendums on the assessing issue. This was the exact same language that we had supported in SB 287 from the ’07 session, which was ultimately removed during conference committee. A competing amendment was also offered that would remove the 15,000 parcel language and instead eliminate all township assessing duties. It was agreed to behind closed doors that the complete elimination amendment would be offered first and Senator Landske would only offer our amendment if the other failed.

We proceeded to work the Senate floor over the next several hours, asking legislators to oppose the competing amendment and support our referendum language as an alternative. Our efforts paid off as the amendment calling for the complete elimination of township assessing failed to pass and our amendment was adopted 24-20. Because of a procedural technicality, the elimination amendment was going to be called back for a re-vote the next day. Again, after working the entire Senate, it
became clear that there was not enough support for the elimination amendment and the author declined to offer it. The Senate ultimately passed HB 1001 with our township-by-township referendum language included by a vote of 33-14.

Unfortunately, the final two weeks of the legislative session are when conference committees meet, largely behind closed doors, to iron out the details of contentious bills. Despite our constant communications with leadership in the four caucuses as well as our strongest supporters within those caucuses, the chief negotiators on HB 1001 agree to a combination of the concepts that have revailed throughout the session. HB 1001 ultimately calls for the transfer of assessing duties from township assessors and trustee-assessors to the county assessor in townships with less than 15,000 parcels. In townships with more than 15,000 parcels, referendums will be held this November on whether to maintain the assessing duties at the township level.

It is important to note that this bill only transfers assessing duties to the county assessors. Trustee-assessors will continue to perform their assessing duties. The transfer is set to take effect July 1st of this year, though the bill does not outline how that transition is to occur. It does require DLGF to determine a procedure and schedule for the transfer, and we are communicating with their representatives to find out the details. Representatives from the ITA attended a meeting on March 26th to learn more information. However, the outcomes of the discussion are forthcoming. We will keep you informed as the DLGF releases their plan for transitioning.

The bill does include some provisions that we asked for to make the best of a bad situation. Before July 1st, county assessors shall interview or give the opportunity to interview township assessors, trustee-assessors and their employees. Also, after June 30, 2009, an employee of the county assessor who performs real property assessing duties must have attained the same level of certification as required of county assessors (County assessors running in an election after June 30, 2008 are required to have Level 2, and in elections after January 1, 2012 are required to have a Level 3). We felt this was important because our members that have become certified will be the first ones the counties turn to when it comes to hiring additional staff. Finally, the bill also gives the counties the authority to create satellite offices throughout the county, which will hopefully ultimately be staffed by our members.

PROPERTY TAX RELIEF

The main focus of HB 1001, however, was to provide property tax relief to homeowners, both short term and long term. The legislature succeeded in providing the short term relief, as Hoosiers will see a statewide average drop in their 2008 tax bills of 26% compared to their ’07 bills. The immediate relief comes mainly in the form of an additional $620 million in homestead credits (on top of the $250 million in credits already due to taxpayers as a result of the installation of slots machines at Indiana’s two horse tracks, which was approved last year). Estimates show that the average tax bill will be 33% below what it would have been in 2009 and 36% lower in 2010. The property tax relief will be paid for by a 1% increase in the state sales tax, effective April 1st.

The long-term property tax relief promised to Hoosiers will largely be funded on the backs of local government units, and only time will tell if the legislature succeeded in this respect. The ITA Lobbying Team worked closely with representatives from the Indiana Association of Cities and Towns, the Association of Indiana Counties, and other local government associations to voice our concerns with the path laid out by the architects of HB 1001, but those concerns largely fell on deaf ears.

HB 1001 tweaks the circuit breaker figures currently in the Indiana Code, making it even more difficult for local government units to continue providing basic services to their constituents. Under HB 1001, homesteads will be capped at 1.5% of their assessed value in 2009 and 1% of their AV in 2010 and beyond. Other residential property will be capped at 2.5% of their AV in ’09 and 2% of their AV in 2010 and beyond. Commercial and other real and personal property will be capped at 3.5% of their AV in ’09 and 3% of their AV in 2010 and beyond. In addition, the legislature also took the first step in amending these caps into the Indiana Constitution with the passage of SJR 1. The same language must be passed by the General Assembly in either 2009 or 2010 and must then be approved by voters in a referendum during the 2010 general election to be included in the Constitution.

be negatively impacted by the circuit breaker. Statewide credits in 2010 will cause an average reduction in townships’ budgets of 4.6%. Cities and towns statewide will see an average budget reduction of 7%. For units hit especially hard by the caps, the law allows them to appeal to the Distressed Unit Appeal Board for temporary relief from the caps. The bill also retains the ability of counties to adopt local option income taxes to raise replacement revenue or to provide additional tax relief.

ITA representatives testified numerous times in front of committees and held several meetings with various lawmakers on the potential harm caused by the caps, but given the current political clime and the uproar last year in certain communities, the legislature was largely adamant in passing the circuit breaker.

In a further effort to provide long term property tax relief, the state assumed the cost for several levies currently paid for out of local funds. Going forward, the state will now pick up the tab for child welfare levies, the incarceration of juveniles, hospital care for the indigent, preschool education, the remaining school general fund levies, and the pre-1977 local police and fire pension costs. In addition to the increase in the state sales tax, the state will also offset the costs for picking up these local levies by eliminating the property tax replacement credits and certain state homestead credits.

HB 1001 also includes several provisions designed to restrict spending at the local level. For local non-school local construction projects, a referendum will be required for any project with a cost greater than $12 million or 1% of the unit’s AV (whichever is less) if at least 100 people petition for the referendum. For projects costing less than $12 million or 1% of the unit’s AV (but at least $1 million), a petition and remonstrance process is required.

In addition, the bill eliminates several available excess levy appeals and exceptions, including appeals for fire protection and township assistance. The bill only allows for appeals due to a natural disaster, an accident, or other unanticipated emergency, and moves the responsibility for hearing the appeal from the county to DLGF. Finally, the bill also requires local units in a county without a board of tax adjustment to submit their proposed tax rate, tax levy, and budget to the ounty fiscal body for a nonbinding recommendation. At one point in time during the legislative session the bill required units to have their rates, levies and budgets approved by the county. Changing this to a nonbinding review was a positive modification.

Make no mistake- HB 1001 placed the blame for property tax crisis, and the question remains as to exactly how widespread the crisis, squarely on the perceived spending habits of local government. With vocal tax activists speaking out in several areas of the state last summer, and with Bart Peterson’s stunning loss last fall in the Indianapolis Mayoral campaign, lawmakers felt compelled to pass a property tax relief package during this short legislative session. The result is that it will now be more difficult for local government units to raise the revenue necessary to meet the needs of their constituents.

OTHER ISSUES THIS SESSION

Even though HB 1001 and the assessing issue dominated our time, your ITA Legislative Team did follow and weigh-in on several other proposals during this year’s legislative session. Once again the subject of Marion County government consolidation was on the table and was ultimately unsuccessful, this time in the form of SB 280. Though it was the same issue that had been discussed the last several years, the dynamics changed with the election last November of Republican Greg Ballard as Mayor of Indianapolis.

The legislation originally called for the elimination of trustees and assessors in Marion County upon approval by the City-County Council and the Mayor, with their duties being transferred to the County. It also originally called for the consolidation of fire departments in the County into the Indianapolis Fire Department. We testified against the bill in committee and nearly had the bill killed at the outset. The final vote was 5-3 with three members absent, and we believe all three absent members would have voted “no”.

The bill was subsequently amended to only allow for the consolidation of fire services in Marion County and passed the Senate. When it became clear that the bill would not receive a hearing in the House of Representatives, the language was amended into HB 1105, which again passed the Senate. The House Democrat conferee, at the direction of House Democratic leadership, removed the fire consolidation language in Conference Committee, and the language ultimately failed once again.

Rep. Bill Crawford stated on numerous occasions that this was not the year to discuss Marion County consolidation, and that such discussions should take place next year in the context of the Kernan-Shepard Commission recommendations. This means that the Marion County consolidation issue will again be back next year.

Another bill that we monitored throughout the session was SB 312, which would have allowed for the elimination of county commissioners and the creation of a single county executive. This concept was recommended by the Kernan-Shepard Commission, and we believed it would have established a precedent for future consolidation proposals coming out of the Commission. The original bill would have automatically enacted these changes throughout the State without approval by referendum, but later versions required approval by a majority of the county commissioners and ultimately by a public referendum.

Though the bill was not enacted into law, and though we did not have a personal stake in the county commissioner issue itself, we were pleased that the referendum concept seemed to be a requirement as the discussions moved forward. This will be important as the legislature begins to look closely at consolidation in future sessions.

And that will most certainly be a focus in coming sessions, especially if Governor Mitch Daniels is re-elected. The Governor and other legislative leaders have stated repeatedly that the property tax relief and reform package passed this session was merely the first step at reforming Indiana’s government structure and that the implementation of the Kernan-Shepard recommendations would be the second step. As you all know, one of those recommendations was the complete elimination of township government in Indiana.

We fully expect a bill (or bills) to be introduced next session that will call for the elimination of townships, and those bills will at the very least receive some discussion. There were actually a couple of bills introduced this year, but given the short time frame to work with and the focus on property tax relief, they were never heard. That will not be the case next year.

In light of this fact, your ITA Lobbying Team has already discussed how we address these efforts beginning now. We can’t wait for next session to arrive- we must begin laying the groundwork for success this spring and summer. We have discussed inviting key legislative leaders into township offices so that they can see for themselves the important services we provide to the community. We are working on a list of “best practices” to share with legislators (and with other trustees) on how to maximize efficiency and efficacy in your offices. And we are monitoring efforts in several communities to consolidate local government units to better provide service to the taxpayers at lower costs. These stories will play well when the General Assembly reconvenes next year. We will continue to communicate with you on our efforts, and we urge you to share your thoughts and suggestions with us as well. Your involvement is key.