P1246990964lNURx

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www.ibrc.indiana.edu/LakeGov
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Lake County Government Finance Study

• The Study Partners
• Center for Sustainable Regional Vitality
• Indiana Business Research Center
• Northwest Indiana Local Government Academy
• Partners for Good, LLC

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What Prompted the Study?

• Confusion, anxiety, anger over property taxes
• Reassessment
• High cost of government services
• Higher bills
• Lack of information, lack of understanding
• Knee-jerk responses
• Bad decisions

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Goals of this study

• Provide information on what caused changes in
  property taxes and detailed data on what actually
  happened to property tax bills in Lake County.
• Examine patterns of local government revenues and
  spending among Lake County governments and
  compared to other places in the state.

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Principle Behind the Study

• In the view of the authors of this report
• Any comprehensive effort to address the challenge
  of financing local government should be based on
  credible data and careful analysis.

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Sponsors

• Bank Calumet
• Bank One
• BP Products
• City of Whiting
• Greater NW Indiana Assoc. of Realtors
• Horseshoe Casino
• International Steel Group
• Ispat Inland
• Lakeshore Chamber of Commerce

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Sponsors

• Mercantile Bank, a member of the Harris
  group of companies
• Miller Citizens Corporation
• NIPSCO
• Sand Ridge Bank
• The Times of Northwest Indiana
• Tugtel Communications
• United States Steel Corporation

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Advisory Council

• Larry Acheff, Director, Lake County Library
• Gene Ayers, Ayers Realty
• Tom DeGiulio, Town Manager, Munster
• Tom Galovic, former President, Mercantile Bank
• Michael Griffin, Clerk-Treasurer, Highland
• Tom Keilman, Director of Public Affairs, BP
  Products
• Joe Kosina, former president, Lakeshore Chamber
  of Commerce

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Advisory Council

• Jim Martin, Spokesman, Miller Citizens Corp.
• Mary McShane, Member, Dyer Town Council
• Nancy Smith, Executive Vice President, Greater
  NW Indiana Association of Realtors
• Will Smith, President, Lake County Council
• Bill Timmer, Fire Chief, Town of Highland
• Garnett Watson, Chief of Police, City of Gary

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Special Thanks

• Lake County United Way
• Lake Count Assessor, Auditor, Surveyor, Treasurer
  and IT dept.
• Indiana Department of Local Government Finance
  (DLGF)
• Center for Urban Policy the Environment
• Town of Highland
• Indiana Legislative Services Agency

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Research Team

• Indiana University Northwest
• Christopher Antonio, Research Analyst
• Ed Charbonneau, Executive Director, Northwest
  Indiana Local Government Academy
• Dr. Daniel Lowery, former Director, Center for
  Sustainable Regional Vitality
• Tim Sutherland, Interim Director, Center for
  Sustainable Regional Vitality

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Research Team

• Indiana Business Research Center, Kelley School
  of Business, Indiana University
• Dr. Jerry Conover, Director
• Michael Hollingsworth, Senior Analyst/Programmer
• Rachel Justis, Editor and Graphic Design
• Joan Ketcham, Data Coordinator
• Amber Kostelac, Data Manager
• Carol O. Rogers, Associate Director

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Research Team

• Partners for Good, LLC
• Tracey Foreman, President
• Michael Greenwald, Partner
• Morton J. Marcus, Partner

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Communication Support

• Recognizing the importance of the issues, the two
  major daily newspapers of the region The
  Post-Tribune and The Times of Northwest Indiana
  provided a significant service to the community
  by publishing our weekly tax and finance articles
  over a five-month period in 2004.

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Highlights from the Study

• This is simply an overview. Further reading is
  required!
• The full report is on your CD.
• The website provides even greater detail and
  resources
• Website will be kept current.

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How Study Was Conducted

• Property taxes fund many costs of local
  government
• This study examined the two sides of local
  government finance
• Revenues
• We analyzed changes in tax bills
• Expenditures
• We examined budgets and performance of numerous
  local government units

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Data used for Analyses

• Property Taxes
• Compiled tax bill data for all parcels (250,000)
  in two years
• 2001-payable-2002 (before reassessment)
• 2002-payable-2003 (after reassessment)
• Analyzed how tax bills changed due to changes in
• Assessed value Deductions
• Levies 2 tax cap
• other factors

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Data used for Analyses

• The Costs of Local Government
• Efficiency Effectiveness are both important
• Spending data
• Certified Budgets from DLGF
• Additional operational data obtained directly
  from government units
• We analyzed differences across units in the cost
  of providing government services

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Local Government Units

• 1 County
• 7 Cities
• 12 Towns
• 11 Townships
• 16 School districts
• Other special districts
• Libraries
• Sanitation
• etc.

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Analysis ofProperty TaxesFirst, some
background
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Lake County Relies on Property Tax More than Most
Places
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Sources of Revenue for Lake County Governments
Other taxes
Charges
Other taxes
Charges
Property tax
Property tax
Intergov. revenue
Intergov. revenue
Misc.
Misc.
Lake County Percent of Total Revenue, 2002
Utility
Utility
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Taxing Terms

• Lake County has 83 taxing units
• The county, cities towns, townships, library
  districts, school districts, etc.
• Each taxing unit sets a budget thats certified
  by DLGF
• After projecting revenues from other sources, the
  amount left to be raised via property taxes is
  the units Levy
• These units overlap, forming 45 taxing districts
• All the parcels in a given district have the same
  property tax rate (the sum of rates for the
  overlapping units)

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Types of Property

• Real Property
• Land and improvements considered permanent
  additions to the land.
• Personal Property
• All tangible property, other than real property,
  used in business. Includes equipment, fixtures,
  etc.

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Determining Tax Rates

• Each taxing units levy is apportioned across the
  taxing districts that taxing unit is in.
• Each parcel is assessed. After subtracting
  deductions, the sum of all the assessments in a
  given taxing district is the districts NET
  ASSESSED VALUE (NAV).
• For the district
• LEVY
• TAX RATE ----------------------------------
  
• NET ASSESSED VALUE

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Individual Property Tax Bills

• Once DLGF certifies the districts tax rate,
  bills are calculated for each parcel, based on
  its assessed value.
• A parcels NAV its Gross Assessed Value (GAV)
  minus deductions
• Homestead deduction (35,000)
• Mortgage deduction (3,000)
• etc.
• Parcels tax due tax rate X its NAV minus any
  credits

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Pop Quiz!

• What can cause a property owners tax bill to
  rise?
• An increase in the levy
• An increase in the tax rate
• An increase in the propertys assessed value
• The legislatures increase in the homestead
  deduction from 6,000 to 35,000
• All of the above!

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A Zero-Sum Game

• Reassessment did not change levies.
• If someones property taxes go down, someone
  elses must go up (all else being equal)
• Lowering the tax bills of one group of taxpayers
  automatically increases the bills of others.
• The only ways to reduce tax bills for all
• Lower the cost of government (the levy), or
• If the levy rises, spread its cost among more
  taxpayers (which requires economic development)

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Why Reassessment?

• The old assessment rules favored older properties
  (depreciation was factored in regardless of
  property condition).
• This continually shifted the tax burden to newer
  homes and to business personal property.
• Indiana Supreme Court effectively decreed that a
  fair market value system is required.

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Legislature to the Rescue?

• To save homeowners (voters) from big tax
  increases, the legislature enacted tax relief
• Increased homestead deduction to 35,000 (to
  reduce NAV)
• Increased PTRC for real property
• Increased the homestead credit
• But what effects did these relief actions have?

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What Changed from p02 to p03?

• Lake County as a Whole
• Generally speaking
• Business personal property values increased only
  a little, so taxes were shifted to real property.
• For real property owners, tax burden shifted from
  industrial and other taxpayers to residential
  taxpayers.

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County-level Changes

• Levies rose by 1.2 (9.6 million)
• Varied across cities from - 41 to 62
• GAV rose by 97 (13.5 billion)
• Big differences between real personal property

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Residential share of GAV for real property jumped
dramatically
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Residential share of NAV grew greatly
industrial share dropped
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Taxes billed for real property rose by 12
(52.5 million)

• Not due to any big hike in levy
• Due partly to more parcels (0.4)
• Main cause 100 million drop in personal
  property values shifted the tax burden to real
  property

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Average tax bill rose 203
But the change varied by type of property
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Cities, Towns Townships Highlights of Tax
Changes

• Levies rose in all but 3 cities towns
• NAV doubled or tripled everywhere except Gary
  East Chicago (
• Average residential tax bills increased by under
  250 in almost half the cities and towns
• Largest increases
• Whiting 2,440 Munster 1,030
• East Chicago 1,411 Hammond 1,003

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The 2 Tax Cap

• Tax cap was adopted as a temporary measure to
  relieve residential taxpayers (with homestead
  credit) hit hardest by big tax increases.
• No property with homestead credit would pay more
  than 2 of GAV
• Before cap, effective tax rates 2 in
• Gary (4.0)
• East Chicago (3.6)
• Whiting (3.3)
• Hammond (2.4)
• Griffith (2.1)

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Overall, the 2 cap

• Applied to 31,000 homes
• Applied to 26 of properties with a homestead
  deduction
• Saved those taxpayers nearly 16 million
• Reduced tax bills of eligible properties by 23
  of the tax due, on average
• Gave relatively more relief to lower-value homes
  and a few high-value homes

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2 Cap Effects Vary by City

• Gary, Hammond East Chicago receive 87 of the
  cap relief

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In half the places,
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Demographic Context
2nd largest county in the state 123rd largest
county in the nation
(out of 3,141)
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Economic Context

• 176th in nation average earnings per
  manufacturing job of 64,000
• 12 of all jobs are in manufacturing
• 24 of private industry earnings come from
  manufacturing

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Losing Ground in Wages
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Top Five Industries by Number of Jobs
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More than 50,000 commute out of the county for
work
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Percent of Housing Units Built Before 1940 and
Change in Tax Bill
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Percent of Housing Units Built Before 1940 and
Change in Tax Bill
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Continuous Measurement

• The IBRC will continue to update Lake County
  demographics for this purpose using
• American Community Survey
• Local Employment Dynamics
• STATS Indiana commuting patterns
• STATS Indiana tax and budget data

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Local Government Performance

• Points of comparison are essential in assessing
  public sector performance
• a unit of local governments own performance in
  prior time periods
• an established target or goal
• the performances of other units of local
  government

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Local Government Performance

• The following slides are examples
• The Report provides much greater detail
• And the web site even more .

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Comparisons Across Local Governments
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Parks Recreation
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Police Departments
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Teachers as of School District Employees
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Students per Teacher
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Police Spending Per Capita
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Fire Department Costs Per Capita
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Cost per Fire
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Households per Firefighter
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Budgets by Department
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Budgets by Type by Year
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Recommendations for Action

• Government Efficiency Effectiveness
• Pursue business process re-engineering.
• Benchmark best practices elsewhere
• Identify ways for local govts to operate more
  efficiently
• DLGF should push for activity-based accounting.
• Permit biennial budgeting at local level.
• To encourage better planning
• Establish performance-measurement task forces.
• NIRPC should sponsor
• Several task forces for different functions
• Charge develop common sets of performance
  indicators

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Efficiency Effectiveness Recommendations
(contd)

• Improve efficiencies consolidate services in
  Whiting East Chicago.
• Significant budget cuts are needed while
  maintaining service
• Whiting consolidate some services with adjacent
  communities
• Examine county sheriff jail expenditures.
• Study court system to improve efficiency.

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Efficiency Effectiveness Recommendations
(contd)

• Streamline Lake County government.
• Establish 3 new support departments
• Human Resources
• Management Information Systems
• Administrative Services
• They should develop policies, procedures
  accountability tools, performance reports for
  county council commissioners

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Efficiency Effectiveness Recommendations
(contd)

• Consolidate assessment function.
• Administer poor-relief more cost-effectively.
• Promote efficiency effectiveness in all units
  of local government.
• Reduce conflicts of interest involving public
  employees.

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Tax Policy Recommendations

• Report on Big Fours improved tax position.
• Adopt local option income tax.
• Extend and amend property tax cap.
• Minimum fee for municipal services.
• Dont use casino revenues for property tax relief.

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Other Proposed Actions

• Spread burden of TANF across all Hoosiers (State
  should be responsible)
• Revise property tax bills to include explanatory
  information.

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Where do we go from here?

• Continue this work in other parts of Indiana.
• Porter LaPorte Counties are logical next steps
• Using this studys findings as a benchmark, track
  progress annually toward more efficient,
  effective local government.

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Local Govt Academy Will

• Work with NIRPC to develop opportunities to
  implement change improve efficiency in local
  governments
• Develop training programs for local govt
  officials to operate more efficiently
• Coordinate local follow-through on this studys
  recommendations

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Reaction Panel

• Linda Buzinec (Mayor, Hobart)
• Dan Klein (Mayor, Crown Point)
• Harold Foster (Vice Cairman, Gary Chamber of
  Commerce CEO, Tugtel Communications)
• Vincent Galbiati (President, NWI Forum)

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Questions Discussion
www.ibrc.indiana.edu/LakeGov