2013 Watchdog Indiana Legislative Agenda

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SUMMARY

1. State Budget
House Bill 1001 Budget Bill Transportation Funding Provisions: Taxpayer Friendly. SIGNED BY GOVERNOR
2. Property Tax
Senate Bill 319 Soil Productivity Factors: Taxpayer Friendly. SIGNED BY GOVERNOR
3. Other Significant Legislation
House Bill 1011 Public Mass Transportation: Taxpayer Friendly. SIGNED BY GOVERNOR
House Bill 1313 Rental Inspections: Taxpayer Friendly. SIGNED BY GOVERNOR
Senate Bill 349 Municipal Utility Funds Diversion to Local Economic Development Organizations: Taxpayer Neutral. SIGNED BY GOVERNOR

Watchdog Indiana identifies those 2013 Indiana General Assembly bills that have the potential to significantly impact good government from the standpoint of the state and local tax burden of Hoosier working families. These bills are analyzed to determine if they are Taxpayer Friendly, Taxpayer Neutral, or Taxpayer UNfriendly. Legislation is Taxpayer Friendly if it is results-oriented, compassionate, and fiscally responsible. These important bills are grouped in the following categories: (1) State Budget, (2) Property Tax, (3) Other Significant Legislation.

1. State Budget

House Bill 1001 Budget Bill Transportation Funding Provisions: Taxpayer Friendly

STATUS: Conference committee report adopted by the House 70-30, adopted by the Senate 39-11, and signed by the Governor.

The 2013-15 State Budget is Taxpayer Friendly because the included transportation funding provisions are Taxpayer Friendly.

The 2013-15 State Budget removes all non-transportation funding from the state Motor Vehicle Highway Account. The non-transportation funding is properly moved to the state General Fund so more money is available for distribution to the Indiana Department of Transportation (INDOT), cities, towns, and counties. Of the increased transportation distributions, 53% goes to INDOT, 15% to cities and towns (allocated based on population), and 32% to counties (based on a formula that accounts for miles of county roads and motor vehicle registrations in a county relative to state totals). The details of the non-transportation funding changes and the resulting Taxpayer Friendly increases in transportation spending are summarized next.

State Police Department Funding: The requirement is removed that one-half of the amount appropriated for the State Police Department be deducted from the Motor Vehicle Highway Account before the statutory allocation to cities, towns, counties, and INDOT is made.
INDOT Increase: $42.5 to $47.8 million in Fiscal Year 2014 and $42.6 to $47.9 million in Fiscal Year 2015.
Cities and Towns Increase: $12.0 to 13.5 million in Fiscal Year 2014 and $12.1 to $13.6 million in Fiscal Year 2015.
Counties Increase: $25.7 to $28.9 million in both Fiscal Years 2014 and 2015.

Bureau of Motor Vehicles Funding: The amount appropriated from the Motor Vehicle Highway Account is reduced from $40,149,403 in Fiscal Years 2012 and 2013 to zero.
INDOT Increase: $21.3 million in both Fiscal Years 2014 and 2015.
Cities and Towns Increase: $6.0 million in both Fiscal Years 2014 and 2015.
Counties Increase: $12.8 million in both Fiscal Years 2014 and 2015.

Department of Revenue Funding: The amount appropriated from the Motor Vehicle Highway Account is reduced from $9,682,918 in Fiscal Years 2012 and 2013 to zero.
INDOT Increase: $5.1 million in both Fiscal Years 2014 and 2015.
Cities and Towns Increase: $1.5 million in both Fiscal Years 2014 and 2015.
Counties Increase: $3.1 million in both Fiscal Years 2014 and 2015.

Criminal Justice Institute and School Traffic Safety Funding: The total amount appropriated from the Motor Vehicle Highway Account is reduced from $842,184 in Fiscal Years 2012 and 2013 to zero.
INDOT Increase: $0.4 million in both Fiscal Years 2014 and 2015.
Cities and Towns Increase: $0.1 million in both Fiscal Years 2014 and 2015.
Counties Increase: $0.3 million in both Fiscal Years 2014 and 2015.

The 2013-15 State Budget also takes 13% of the Sales and Use Tax revenue collected from gasoline sales out of the state General Fund and deposits it in the state Motor Vehicle Highway Account. The details of this change and the resulting Taxpayer Friendly increases in transportation spending are summarized next.

Distribution of Sales and Use Taxes: The amount of Sales and Use Tax revenue deposited in the state General Fund is reduced from 99.848% to 98.848%, with the 1.000% remainder (which represents 13% of the Sales and Use Tax collected on gasoline sales) going to the Motor Vehicle Highway Account. Distributions from the Motor Vehicle Highway Account remain at 53% to INDOT, 15% to cities and towns, and 32% to counties.
INDOT Increase: $37.8 million in Fiscal Year 2014 and $39.3 million in Fiscal Year 2015.
Cities and Towns Increase: $10.7 million in Fiscal Year 2014 and $11.1 million in Fiscal Year 2015.
Counties Increase: $22.8 million in Fiscal Year 2014 and $23.7 million in Fiscal Year 2015.

The 2013-15 State Budget makes better use of the existing state Gasoline Tax and state Sales Tax revenues from gasoline purchases with NO NEW TRANSPORTATION TAX INCREASES to significantly increase transportation funding as summarized next.

In addition, the 2013-15 State Budget takes $200 million from the state General Fund in both the 2014 and 2015 fiscal years to establish a $400 million Major Moves 2020 Trust Fund to possibly provide AMTRAK service and equipment in Indiana and fund major highway expansion projects like the completion of I-69, the widening of I-70 and I-65 to six lanes, and the construction of a Commerce Connector boondoggle around the east and south sides of Indianapolis.

It is unfortunate that the 2013-15 State Budget was unethically amended to permit a county income tax council to impose a motor vehicle excise surtax and a wheel tax (current law provides that only the county council may impose these taxes). The problem with county income tax councils is demonstrated in Boone County where 8 of the 37 county income tax council members representing only 42% of the county population could impose a county-wide motor vehicle excise surtax and wheel tax even if 29 of the members representing 58% of the population vote No. This Taxpayer UNfriendly assault on the American concept of majority rule was repudiated by the House when it voted 67-31 on February 18 to defeat the stand-alone House Bill 1117. At least the transportation funding increases in the 2013-15 State Budget make unnecessary the imposition of additional motor vehicle excise surtaxes and wheel taxes, and may be enough to rescind these regressive taxes in some counties!

2. Property Tax

Senate Bill 319 Soil Productivity Factors: Taxpayer Friendly

STATUS: Passed the Senate 48-0, passed the House 98-0, and signed by the Governor.

Each farmland assessment begins with the base rate per acre, which is $1,630 for taxes payable in 2013. The base rate is then adjusted by the soil productivity factor and influence factors to calculate the assessed value for a particular parcel. Each parcel may have multiple soil types.

In February 2012, the Department of Local Government Finance released new soil productivity factors for use in farmland assessments beginning with the 2012 Pay 2013 tax year. According to available land data from 69 counties, the Pay 2012 soil productivity factors range from 0.5 to 1.28 with an acreage-weighted average of 0.958. The new factors will range from 0.5 to 1.66 with a weighted average of 1.203, or a 25.5% increase in the average. The assessed value of farmland will increase by a similar percentage. The change in assessed valuation is estimated to result in an 18.5% increase in the net property tax on farmland. The total increase in farmland net tax in all 92 counties is estimated at $57 M.

Last year, the Indiana General Assembly delayed implementation of the new factors from 2013 taxes until taxes payable in 2014. This year’s Indiana Senate Bill 319 provides that the soil productivity factors used for the March 1, 2011, assessment of agricultural land must be used for the March 1, 2013, assessment date – meaning that the current soil productivity factors would remain in place for property taxes payable in 2014, and the new soil productivity factors could not be used until 2015. SB 319 also requires the DLGF to confer with the College of Agriculture of Purdue University and submit a report on soil productivity factors in 2013 to the Commission on State Tax and Financing Policy and to any interim study committee studying agriculture issues. 

SB 319 is Taxpayer Friendly because it prevents a significant shift of the property tax burden to farm working families.

3. Other Significant Legislation

House Bill 1011 Public Mass Transportation: Taxpayer Friendly

STATUS: Passed the Senate 39-11 with amendments, the House concurred 59-35 in Senate amendments, and signed by the Governor.

HB 1011 establishes the Central Indiana Transit Study Committee consisting of 16 legislators appointed by General Assembly leaders. The Study Committee will report to the Legislative Council before December 15, 2013, concerning specified transportation issues including bus transit in central Indiana, the feasibility of light rail transportation, and whether a referendum should be used to establish a central Indiana transit district. HB 1011 will also prohibit until March 15, 2014, the following counties from entering into new interlocal cooperation agreements and establishing new regional transportation authorities to provide public transportation services: Boone, Delaware, Hamilton, Hancock, Hendricks, Johnson, Madison, Marion, Morgan, and Shelby. Existing interlocal cooperation agreements to provide transportation services will not be prohibited. HB 1011 is Taxpayer Friendly because construction of a costly light rail transportation system cannot be approved by a new central Indiana transit district before March 14, 2014.

The previously passed House version of Indiana House Bill 1011 would allow ten Central Indiana counties to conduct local referendums to establish a metropolitan transit district to accomplish two immediate purposes: (1) receive federal tax dollars to build a commuter train service from Noblesville to downtown Indianapolis and (2) accept a local income tax increase to double the Indianapolis bus service.

The proposed train service is estimated to cost at least $625.4 million. A project this expensive cannot be built without federal funds. The “Red Menace” of our runaway federal debt dictates that any future federal funding available for rail transit systems will have to be allocated based on legitimate need. The Indianapolis metropolitan area will be a low priority for scarce federal rail transit dollars because of limited vehicle traffic congestion. Therefore, the only source of funding for the Noblesville to Indianapolis train service would be budget-busting federal earmarks. We can no longer afford to scrounge for federal dollars when more than 40 cents of every federal dollar is borrowed and our total federal debt exceeds $16 trillion.

Furthermore, the proposed train service would be like every other U.S. rail transit line and not come close to covering its estimated $16.8 million annual operating costs. Central Indiana Hoosiers do not live or work in environments dense enough to need any higher-capacity public transit other than buses.

Any high-density housing, retail shops, office development, and park-and-ride facilities along the rail transit line would likely entail subsidies to developers, mostly in the form of tax increment financing. A literature review commissioned by the Federal Transportation Administration found that "urban rail transit investments rarely ‘create’ new growth"; at most, they "redistribute growth that would have taken place without the investment." Portland has spent nearly $3 billion building light rail lines and nearly $2 billion subsidizing developments along the light rail and streetcar lines.

The only transit plan needed by Central Indiana is one that allows voters to decide if at least $50 dollars a year should be taken from the paychecks of the working poor to increase the taxpayer subsidy to an enlarged IndyGo bus service that the great majority of residents will never use.

The House Version of HB 1011 is Taxpayer UNfriendly because it would allow a central Indiana metropolitan transit district to use borrowed federal tax dollars to build a costly commuter train service from Noblesville to downtown Indianapolis.

House Bill 1313 Rental Inspections: Taxpayer Friendly

Status: Passed the Senate 30-19 with amendments, the House concurred 51-32 in Senate amendments, and signed by the Governor.

Indiana House Bill 1313 urges the Legislative Council to assign the important topic of regulation of residential leases by local governments to a study committee during the 2013 legislative interim. In anticipation of appropriate action during the next session of the General Assembly, HB 1313 properly prohibits a local government from adopting regulations for landlord licensing, mandatory landlord classes, and rental inspection and registration fees until July 1, 2014. The limitation of residential leases regulation by local governments included in HB 1313 is Taxpayer Friendly because routine rental inspections create the following problems: (1) Fourth Amendment concerns regarding "unreasonable searches and seizures” without a “probable cause” warrant; (2) practical application difficulties; (3) unnecessary and costly duplication of state law and local ordinances that already sufficiently address public safety and health concerns; (4) improper alteration of well-established legal precedents regarding landlord and renter rights and obligations; (5) unequal enforcement; (6) rising overall rents; (7) disappearance of lower rent units; and (8) higher eviction rates of lower income Hoosiers. 

Senate Bill 349 Municipal Utility Funds Diversion to Local Economic Development Organizations: Taxpayer Neutral

Status: Conference committee report adopted by the Senate 48-2, adopted by the House 89-6, and signed by the Governor.

Many cities and towns throughout Indiana have municipally owned utilities. These municipally owned utilities are typically governed by a utility service board appointed by the municipal executive and city or town council.

Under Indiana Code 8-1.5-3-11, the only allowed transfer of the surplus earnings of a municipally owned utility is from the utility’s cash reserve fund to the municipality’s general fund if approved by the city or town council and the utility service board. Otherwise, a utility’s cash reserves can only be used to meet the needs of the utility.

Indiana Senate Bill 349 would have authorized a city or town council, with the approval of the utility service board, to also donate funds from a municipally owned utility's surplus earnings to any local economic development organization anywhere in Indiana for use in maintaining undefined existing infrastructure if specified debt obligations of the utility are met before the donation is made. 

Most local economic development organizations (unlike municipalities and municipally owned utilities) are not subject to audit by the State Board of Accounts, thereby making it difficult to determine if the donated utility cash reserves are properly used to maintain existing infrastructure.

Even more important, less money in the cash reserve fund of a municipally owned utility could result in utility rate increases if utility operating, depreciation, bond, or retirement expenses increase.

It is Taxpayer UNfriendly to allow any portion of a ratepayer’s utility bill payment to be diverted to any local economic development organization.

CONFERENCE COMMITTEE OUTCOME: A municipal legislative body, with the approval of the board of the municipality's municipally owned utility, may donate funds from the municipally owned utility's surplus earnings to a local economic development organization as long as the terms and conditions of any bond ordinance, resolution, indenture, contract, or similar instrument binding upon the municipally owned utility are complied with before the donation is made ONLY if the municipality meets both of the following conditions: (1) the municipality has a municipally owned utility that has donated funds of the municipally owned utility to a local economic development organization before July 1, 2012, and (2) the municipality is a city having a population of more than eleven thousand (11,000) but less than eleven thousand four hundred fifty (11,450). Peru is the only Indiana municipality that meets both of these conditions.

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This page was last updated on 03/09/15 .