Indianapolis Mayor Greg Ballard will introduce a budget Monday night that closes the city’s $55 million shortfall without raising income taxes, but it does expand the city’s tax base while holding the line on spending and adding new police officers.
Due to the national economy and declining income tax revenues Indianapolis was facing a $55 million shortfall for the 2014 budget. City officials say they managed to close that gap while keeping most city services unchanged, but they used virtually every financial tool in their kit to do it.
- Although the city budget is about $1 billion, in fact only about $592 million is used for the operations of city-county government, the rest are dedicated funds that can only be used for certain purposes, like roads and sewers. While most city-county budgets will stay flat, the Marion County Sheriff’s budget is taking a $5.4 million hit. Ballard administration officials say every other County office has stayed within its budget with the exception of the Sheriff. There is an increase in the Clerk’s office to cover the costs of the 2014 Elections. The parks budget stays the same and the city maintains crime prevention grant funding. The budget does not dip into any TIF, Rebuild Indy or Fiscal Stability Funds to cover operating expenditures. In addition there is no additional funding for raises, departments will have to use their existing budgets to cover those costs and health care costs remain flat; in the past they have increased five to seven percent annually.
Finding New Revenues
- The Ballard administration is not raising income taxes to balance the budget, but it is expanding the tax base, somewhat. The city proposes to expand IMPD’s taxing district to the entire county, right now its taxing authority is limited to the old IPD district which is basically the old city limits.. By expanding the tax base officials say that will generate an additional $1.3 million for city coffers. In addition, the Ballard administration is also shooting for another elimination of the local homestead tax credit which would generate about $11.5 million. There is also a fuel surcharge on IMPD and IFD take home vehicles which would add $1.4 million to the city budget. In addition, the administration also makes adjustments to agency budgets and makes some adjustments to its debt service.
Expand IMPD’s Tax Base
- The most controversial portions of the administration’s budget plans are likely to be the expansion of IMPD’s taxing District and the elimination of the Homestead Exemption. With regards to expanding IMPD’s taxing authority, officials say the original district was not expanded when the merger took place back in 2006. That means if you are are homeowner inside the old city limits you are paying both property taxes for IMPD as well as County Option Income taxes. If you live outside the old city limits, then you are just paying the COIT. By expanding the tax base, city budget planners say more money can be collected for public safety, while lowering IMPD’s property tax rate by 70%. Under the current system a $100,000 home in the old city limits pays $365 annually, under the new district that tax bill would be $114; Lawrence, Speedway Southport and Beech Grove would not be included. Expanding the tax district would generate about $3 million for IMPD.
Homestead Credit Elimination
- The Council failed to pass the original local homestead credit elimination, however the Ballard Administration is taking another bite at the apple. Officials say it would generate $11.5 million for IMPD, it would not impact homes that are already at the one percent tax cap and have an average impact of less than $2 per month on a home not at the one percent cap. It is also important to note that elimination of the local homestead has no impact on the standard $45,000 exemption which is provided by the state.
- Like all budgets, it’s part policy and part politics and balancing the various political interests at the City-County building will be just as tricky as balancing the city’s books. There is of course the Democratic-controlled Council that does not want to give Ballard a victory, but at the same time has to show leadership in offering alternatives. At the same time Republicans, although Mayoral allies, are wary of anything that even looks like a tax increase. And that is what this will boil down to, is the elimination of the local homestead credit and expanding IMPD’s tax base a tax increase? And if so, is it one the citizens of Marion County will swallow, even though by some estimates it only amounts to about $10-$13 a month for a home inside Marion County but outside of the city limits? And if the Council says “no” to the revenue enhancements, then where does it go to find the other $13 million when the Mayor is adamant about not dipping into fund balances? Those will be the big questions and luckily we’ve got until October to get an answer.