Greensburg Daily News, Greensburg, IN

July 9, 2013

Herbert: Controversy over tax increase based on misunderstanding, wildly overblown

By Rob Cox Daily News
Greensburg Daily News

---- — GREENSBURG – The move last month by the City Council to increase the city’s Cumulative Capital Development Fund Tax from roughly 2.6 cents per $100 of assessed property value to 5 cents per $100 of assessed property value is proving unpopular with some residents.

On Monday afternoon, The Daily News contacted both Greensburg Mayor Gary Herbert and Branden Robbins, Financial Consultant with Reedy Financial Group of Seymour, to get some understanding on what the increase means and how much of an impact it will have on Greensburg property owners.

The mayor expressed displeasure with the rumor that the additional revenue from the increase will go toward the proposed expansion of Greensburg Municipal Airport.

“For anyone to say that these additional tax monies, from this increase in the Cumulative Capital Development Fund, will be used to purchase land for the airport expansion – it’s an untrue statement, plain and simple,” Herbert said. “It borders on malicious. That will not happen. This increase has nothing to do with airport expansion whatsoever.”

Herbert was equally adamant regarding rumors that the additional revenue will go toward funding the Veteran’s Parkway Road Project (Veteran’s Parkway is a proposed three-lane road that would run east-to-west across the city from the Hampton Inn on Highway 421 to an outlet at Burger King on Lincoln Avenue).

“The Veteran’s Parkway Project will be funded by Tax Increment Fund (TIF) money, meaning the money will come from tax revenue generated from businesses in the proposed area of Veteran’s Parkway,” the mayor said. “Not a single penny for that project will come from the Cumulative Capital Development Fund. That project will be funded by business.”

The mayor noted, too, that there has also been a measure of confusion regarding how much the increase in the city’s Cumulative Capital Development Fund would impact each individual property owner in the City of Greensburg.

Robbins attempted to shed some light on that issue.

Robbins has worked closely with the City Council in implementing the increase. According to the Reedy Financial Group website (www.reedyfinancial.server290.com), Robbins “provides consulting services to Indiana Counties, Cities, and Towns, Utilities and special taxing districts.”

According to state law, Robbins explained, every city, municipality and county in Indiana may charge a Cumulative Capital Development Fund Tax on property. The maximum amount of that tax, Robbins said, as dictated by state law, is 5 cents per $100 of assessed property value in a city or municipality. The maximum amount in a county is 3.3 cents per $100 of assessed value.

“What happens,” he explained, “is that the amount that can be taxed per $100 of assessed value generally decreases with time, because the value of the property comprising the city, municipality or county increases.”

At present, Greensburg’s Cumulative Capital Development Fund Tax is roughly 2.6 cents per $100 of assessed value.

“It used to be the full 5 cents,” Herbert pointed out. “But over time, if you don’t do anything to adjust it, it goes progressively lower.”

He continued, “The Indiana Department of Local Government Finance (DLGF) only has so much money to divvy out. Some years your city gets more; sometimes you get less. Revenues are down. The Circuit Breaker Cap is in effect. We’re trying to generate what revenues we can without causing too great a burden on the average citizen.”

According to Robbins, the “Circuit Breaker Cap” the mayor mentioned is a state-mandated limit on the maximum amount in property taxes any given property owner can be required to pay by his or her municipality or county.

“The Circuit Breaker was put into place around 2008 or ‘09,” Robbins said. “Once a taxpayer hits the cap, they can’t be required to pay any more, regardless of the Cumulative Capital Development Fund Tax.”

According to Robbins, the Circuit Breaker amounts are different depending on the type of property. Homeowners, for instance (who properties are defined as “homesteads” under the law) can pay no more than 1 percent of the total value of their property in taxes.

A homeowner who property is valued at $100,000, Robbins said, would be capped by the Circuit Breaker Law at no more than $1,000 in total property tax.

The Circuit Breaker is 2 percent for “rentals or AG land,” Robbins added, and 3 percent for “commercial/industrial” properties.

“Therefore,” he explained, “if the hypothetical homeowner whose house is valued at $100,000 was already paying $1,000 in property tax for any given year, they would pay no additional tax regardless of an increase in the Cumulative Capital Development Fund Tax.”

The same rule, he added, would apply to property owners under the 2 or 3 percent Circuit Breaker.

In estimating how much the increase to the city’s Cumulative Capital Development Tax will cost in terms of real-world money, Robbins again referred to the hypothetical homeowner with an assessed property value of $100,000.

“For that homeowner,” he said, “we’re talking about 60 additional cents per month added to his or her property tax bill - $7 a year.”

He added, “If, however, that hypothetical homeowner hits $1,000 in total property tax for any given year, they would pay nothing over that amount.”

He further explained, “We’ve also estimated that a commercial property owner with a hypothetical assessed value of $250,000 will pay $4.92 per month.”

As small as those numbers sound, he added, they will nonetheless translate into significant increased revenue for the city. “The city’s overall revenue,” he said, “will be increased by $144,734.12.”

“This has been a long, involved process,” Herbert said. “We’ve had to do a budget for how we’ll use the extra money.”

According to both Herbert and Robbins, there were also a number of special council meetings that had to be held and official, public “readings” of the increase before it could be adopted. And although the council has completed those steps (special sessions were held on both June 10 and 17), the increase still can’t be formally adopted until the end of a 30-day remonstrance period, wherein citizens can voice opposition to the increase. That period will end July 22.

Herbert hopes that Greensburg property owners will see both the need for the increase and the fact that the increase it doesn’t impose, in his estimation, too great a burden on the average taxpayer.

“Cumulative Capital Development Tax money must be used toward municipal projects, towards improving the city and important projects,” the mayor said. “We’re talking about the maintenance of city hall and other city structures. This money goes toward maintaining city equipment, improving buildings and other infrastructure. We might use this money, for instance, to pave roads. This money will help us do things for taxpayers – that’s what matters most. It’s their money and we’re legally bound to use it for their benefit.”

Contact: Rob Cox 812-663-3111 x7011