2015 CCD Property Tax Increase Opposition

There they go again – or, more specifically, there she goes again! Boone County Council Member Marcia Wilhoite has once again instigated what appears to be her annual crusade to unnecessarily increase the property tax burden on those Boone County working families who can least afford it.

Our Boone County Commissioners will vote June 16, 2014, on their Ordinance No. 2014-03 that would allow the Boone County Council to increase the county’s Cumulative Capital Development (CCD) property tax rate by 166% from $0.0125 to $0.0333. There is absolutely no need to increase the county’s CCD property tax rate.

Indiana Code 36-9-14.5 ALLOWED, but not REQUIRED, Boone County to adopt a 2014 budget for its CCD Fund of $830,080 in total spending for the county needs listed next. (Source: Go to the “Indiana Gateway for Local Government Units” at https://gateway.ifionline.org/ - Click on “Report Builder” - Click on “Budgets” - Click on “Line-Item Budget Estimate” - Under “County” select “Boone” - Under “Year” select “2014” - Under “Unit Type” select “County” - Under “Unit” select “Boone County” - Under “Fund” select “2391 – Cumulative Capital Development”  Click on “View Report”)
$254,630 Courthouse/Annex Repairs and Maintenance
$196,450 Information Technology Equipment
$185,000 Jail Building
$180,000 Sheriff’s Vehicles
$  14,000 Bullet Proof Vests
$830,080 TOTAL

In response to a petition from Boone County taxpayers last year, the Indiana Department of Local Government Finance (DLGF) disapproved a CCD property tax rate increase: see http://www.finplaneducation.net/county_ccd_tax.htm. The DLGF disapproval resulted in a 2014 Certified Levy for the county’s CCD Fund of 488,671. (Note: The CCD Fund Certified Levies for prior years were $511,582 in 2010; $505,868 in 2011; $508,460 in 2012; and $482,097 in 2013.) (Source: Go to the “Indiana Gateway for Local Government Units” at https://gateway.ifionline.org/ - Click on “Report Builder” - Click on “Budgets” - Click on “Certified Budget, Levy, Rate” - Under “County” select “Boone” - Under “Unit Type” select “County” - Under “Unit Name” select “Boone County” - Click on “View Report”)

Boone County will use its ample cash reserves to make up the expected $341,409 difference this year between the $830,080 adopted CCD budget and the $488,671 in certified CCD property tax revenues. The Boone County June 30, 2013, Certified Cash Balance of $14,229,636 was a whopping 89.3% of the Boone County 2014 Total Certified Budget of $15,929,961. As a point of reference, the June 30, 2013, Certified Cash Balance for all counties was 49.7% of the 2014 Total Certified Budget for all counties. The Boone County Certified June 30 Cash Balance as a percent of the next year’s Boone County Total Certified Budget for each of the past three years has been no less than 1.74 times greater than the percentage for all counties. Further proof that Boone County has ample cash reserves is that the county’s June 30, 2013, Certified Cash Balance increased $228,568 from a year earlier. (Source: Go to the “Indiana Gateway for Local Government Units” at https://gateway.ifionline.org/ - Click on “Report Builder” - Click on “Budgets” - Click on “Cash Balance as a Percent of Budget” - Under “Unit Type” select “County” - Under “Year” select “2014” then “2013” and then “2012” - Click on “View Report”)

Listed next are the December 31, 2013, Cash & Investments Balance in those Boone County funds that can be used to pay the county expenses currently allocated just to the CCD Fund. (Source: Go to the “Indiana Gateway for Local Government Units” at https://gateway.ifionline.org/ - Click on “Report Builder” - Click on “Annual Financial Reports” - Click on “Cash and Investments” - Under “County” select “Boone” - Under “Year” select “2013” - Under “Unit Type” select “County” - Under “Unit” select “Boone County” - Click on “View Report”)
$ 3,143,568 County General Fund
$    427,679 Cumulative Capital Development Fund
$    365,696 Food & Beverage Tax Fund 
$ 3,804,596 Rainy Day Fund 
$ 2,433,230 Economic Development Fund
$    610,781 CCD Investment Fund
$10,785,550 TOTAL

Boone County had a total $10,785,550 cash balance available on December 31, 2013, to meet this year’s anticipated $341,409 CCD Fund shortfall. In other words, if a $2,400,000 cash balance is retained in the Rainy Day Fund, the resulting $8,385,550 cash balance is almost 25 times more than what is needed to meet this year’s $341,409 CCD Fund shortfall. Combined with the CCD revenues that the county will continue to receive WITHOUT a CCD property tax rate increase, Boone County has ample cash reserves for the foreseeable future to cover the spending needs currently assigned to the CCD Fund.

There is some indication that the Boone County Council wants to use the CCD Fund to pay $600,000 in renovation expenses for the new Washington Street county office building. Excess CCD revenues from prior years have been put in a CCD Investment Fund that barely earned just one-tenth of one percent in interest last year. The $610,781 CCD Investment Fund should be cashed in to pay for any Washington Street renovations before the CCD property tax rate is increased.

Finally, because of the 1% homeowner property tax cap, businesses, farmers, many apartment renters, and lower income Boone County families outside Zionsville would pay the unneeded CCD property tax increase. Because their homes are already at the 1% property tax cap, most higher income Zionsville families would NOT pay the proposed CCD property tax increase.

Lebanon schools have 43.6% of its students who qualify for free or reduced price lunches because their families are lower income – 36.4% of Western Boone and 39.7% of Sheridan students also qualify for free or reduced price lunches. Only 5.4% of Zionsville students have families whose incomes are low enough to get free or reduced price lunches. Unnecessarily increasing the property tax burden on those Boone County working families who can least afford it at a time when the county has ample cash reserves is such poor public policy that it can be accurately identified as fiscal immorality.

Outcome: 2014 CCD Property Tax Increase Opposition

The October 9, 2013, “Findings and Final Determination” document from the Indiana Department of Local Government Finance concludes that “WHEREFORE, based on the above findings and applicable law, the Department disapproves the reestablishment of the Fund because of the cash balances available to the County.” Among the stated reasons for the disapproval was the county reserves are considerably more than 15% of the county’s operating budget. What this means is that our Boone County Council will NOT be able to increase the county’s Pay 2014 Cumulative Capital Development (CCD) property tax rate because the county is not properly using its ample reserves (or making modest spending cuts). Please send an E-mail to taxless3@comcast.net if you wish to receive a PDF copy of the DLGF “Findings and Final Determination” document.

Our Boone County Council’s advertised 2014 budget included an increase of 136% in the CCD portion of the total county property tax rate from $0.0127 per $100 of adjusted net assessed value to $0.0300. The Pay 2014 CCD property tax levy would have increased $690,703 from $482,097 to $1,172,800.

The 2014 budget approved by our County Council on October 8 would have increased the CCD portion of the total county property tax rate by 67% from $0.0127 to $0.0212. The Pay 2014 CCD property tax levy would have increased $347,983 from $482,097 to $830,080. (A Watchdog Indiana E-mail Update will follow soon reporting on the county’s 2014 budget in more detail.)

Because of the DLGF Determination to not allow our County Council to increase the county’s CCD property tax rate, the county’s Pay 2014 CCD property tax rate should decrease from $0.0127 to about $0.0123. Because of the effect of property tax caps, the county will probably receive a little less than $482,097 in Pay 2014 CCD property tax revenue.

This Taxpayer Friendly outcome was the direct result of fanny influence! Seven Watchdogs gathered the signatures of 261 Boone County taxpayers objecting to the CCD property tax rate increase that was passed by our Boone County Council on July 9. Twenty concerned citizens attended the September 4 public hearing where testimony was presented successfully objecting to the CCD property tax increase. 

Background: 2014 CCD Property Tax Increase Opposition

William F. Buckley, Jr., observed "The best defense against usurpatory government is an assertive citizenry." Because our state government supports this good government concept through our Indiana Code, we, the citizenry of Boone County, have asserted ourselves and successfully petitioned our state government, through its Department of Local Government Finance (DLGF), to determine if our Boone County Council has improperly positioned itself to usurp too much of our income through an excessive increase in its Cumulative Capital Development (CCD) property tax rate. It should be noted that five times the minimum number of 50 Boone County citizens signed the petition that required our DLGF, as part of its decision-making process to determine whether or not to approve the proposed Boone County CCD property tax rate increase, to hold a September 4, 2013, public hearing at the Boone County Annex Building in Lebanon. 

The close 4 to 3 vote taken by our Boone County Council on July 9 to increase the Boone County CCD rate by 160% from 1.27 cents per $100 of assessed value to 3.30 cents must be objected to because (1) the county has the same ample reserves available to meet the county’s financial needs as before the Great Recession in 2008; (2) there is considerable room for modest county spending reductions because the 2012 disbursements total from the county’s controlled and noncontrolled funds was 1.12% more than the 2008 disbursements total; and (3) many limited income citizens would be subjected to hardship from disproportionally bearing the burden of the estimated $723,000 annual CCD property tax increase.

Upon request to taxless3@comcast.net, you can obtain via a PDF attachment to an E-mail the August 11, 2010, Boone County Comprehensive Financial Plan that was prepared by H. J. Umbaugh & Associates (Umbaugh Financial Plan). The analysis of the Boone County Financial Management in Handout Pages 1-5 (see below) mirrors the approach used in the Umbaugh Financial Plan Pages 1-1 and 1-2 by dividing the County’s funds into the two categories of Controlled Funds and Noncontrolled Funds.

The Umbaugh Financial Plan on Pages 1-10, 1-14, 1-16, and 1-9 focuses on maintaining a minimum cash reserve of 15% in the County General Fund, Local Road and Street Fund, County Health Fund, and all the Controlled Funds combined. The actual December 31, 2012, County General Fund balance of $5.75 million is 37% of the actual 2012 disbursements of $15.39 million. The actual December 31, 2012, Local Road and Street Fund balance of $206,276 is 46% of the actual 2012 disbursements of $450,352. The actual December 31, 2012, County Health Fund balance of $325,241 is 65% of the actual 2012 disbursements of $501,780. And, most importantly, the actual $11.58 million balance on December 31, 2012, of all the Controlled Funds combined is 55% of the actual 2012 disbursements of $21.24 million. It is readily apparent that the cash reserves in our Boone County Controlled Funds significantly exceed the 15% minimum identified as good fiscal policy in the Umbaugh Financial Plan.

Boone County has six funds with few spending restrictions that can be used to help meet most of the county’s management, maintenance, operating, and capital needs – Rainy Day, County General, Food & Beverage Tax, Cumulative Capital Development, Economic Development, and CCD Investment. The combined balance in these six funds can be considered the county’s reserves for future contingencies. Boone County reserves on January 1, 2008, totaled $13.14 million. Five years later, county reserves had increased to $15.17 million. Boone County Council Members, County Commissioners, other elected office holders, department heads, and employees did a fine job of managing the county’s finances during the slow recovery from the Great Recession. It is remarkable that total county reserves on December 31, 2012, were $2 million more than five years earlier before the Great Recession began!

Some have anticipated that insufficient distributions from the state Motor Vehicle Highway Account might result in a drain on county reserves in order to meet the county’s transportation needs. The threat to county reserves from insufficient state transportation funding was alleviated by the Indiana Code changes that were passed by our General Assembly earlier this year. Boone County will receive significantly more funding every year, including $725,000 each of the next two years, from the state Motor Vehicle Highway Account.

Another reason for the DLGF Commissioner to disapprove the 160% Boone County CCD property tax rate increase is that the county’s estimated 2014 certified COIT shares of $7,425,289.48 will be $365,028.20 more than the $7,060,261.20 certified COIT shares the county received in 2013. The 5.17% increase in 2014 COIT revenues will help the county meet its spending needs without a CCD property tax increase. Documentation for this COIT revenue analysis is available at http://www.in.gov/dlgf/files/2014_COIT_Report_-_August_2013_Estimates.pdf and http://www.in.gov/dlgf/files/2013_COIT_Report_(10.15.12).pdf.

Disbursements from the Boone County Cumulative Capital Development Fund in 2012 were $1.16 million more than receipts. Conversely, 2012 receipts in the County General Fund were $1.34 million more than disbursements. Because most of the county spending priorities assigned to its CCD Fund can also be assigned to its County General Fund, the county has considerable flexibility to use the excess revenue in its County General Fund to alleviate the spending overrun in its CCD Fund.

The $27.70 million in grand total Boone County disbursements from the controlled and noncontrolled funds for 2012 was 1.12% more than before the Great Recession in 2008. The inflation increase from June 2008 to June 2012 was 4.87%. It is fair to say that county spending was cut 3.75% when inflation is considered. It is also accurate to point out there is considerable room for additional modest county spending cuts before property taxes are increased on limited income families.

The Zionsville Pay 2013 total property tax rate of $2.5584 is the highest municipal rate in Boone County. The Lebanon Pay 2013 total property tax rate is somewhat lower at $2.1576. One result of this disparity is that more Zionsville homes are at the 1% property tax cap than Lebanon homes. The value of a Lebanon home at the 1% property tax cap is $243,000 while Zionsville homes valued at $147,100 are protected by the cap from further property tax increases.

The median value of a Lebanon home is $112,076, which is $10,324 less than the statewide average. The median value of a home in Zionsville is $332,853. The owners of almost all Lebanon homes would be impacted by the CCD property tax increase because almost all Lebanon homes are valued less than the $243,000 property tax cap. Almost all Zionsville homeowners would not pay the CCD property tax increase because very few Zionsville homes are valued less than the $147,100 property tax cap.

The median household income in Lebanon is $42,398, which is $4,040 less than the statewide average. The median income of a household in Zionsville is $97,603. The percentage of Boone County public school students in Lebanon who receive free or reduced price lunches is 42.2%, while the percentages for Sheridan and Western Boone are 37.7% and 34.1% respectively. Only 5.5% of Zionsville school students receive free or reduced price lunches.

Because almost all Lebanon homes have a gross assessed value under $243,000, the limited income families of the 42.2% of Lebanon school students who receive free or reduced price lunches would pay the CCD property tax increase. Most of the families of Sheridan and Western Boone students would also pay the CDD property tax increase. Most higher income Zionsville homeowners would not pay the CCD property tax increase because their homes are valued more than $147,100.

Because of the 1% homeowner property tax cap, the bottom line is that businesses, farmers, most renters, and limited income Boone County families outside Zionsville would pay the CCD property tax increase. Most higher income Zionsville families would NOT pay the CCD property tax increase. Many limited income citizens would be subjected to hardship from disproportionally bearing the burden of the estimated $723,000 annual CCD property tax increase.

Taxpayer Friendly public policy is results-oriented, compassionate, and fiscally responsible. The proposed CCD property tax rate increase fails to meet any of the Taxpayer Friendly criteria. Because the county has the same ample reserves available to meet the county’s financial needs as before the Great Recession, and there is considerable room for additional modest county spending reductions, it would be poor public policy to approve a CCD property tax increase on limited income families still struggling to recover from the Great Recession. Our DLGF should not allow our Boone County Council to improperly usurp too much of our income through an excessive increase in its CCD property tax rate.

Boone County Financial Management
(Handout Page 3)

Value of a Lebanon Home at the 1% Property Tax Cap
$ 243,000 Gross Assessed Value
  - 45,000 Standard Deduction
$ 198,000
-  69,300 Supplemental Deduction ($198,000 X 0.35)
$ 128,700
    - 3,000 Mortgage Deduction
$ 125,700 Net Assessed Value of Home
  x 2.1576 Lebanon City Pay 2013 Total Property Tax Rate (per $100 of assessed value)
$2,712.10 Total Pay 2013 Net Property Tax Liability
$2,430.00 Property Tax Cap ($243,000 X 0.01)
  + 282.45 School Referendum Adjustment ($125,700 X $0.2247 / $100)
$2,712.45 Maximum Property Tax Allowed by Property Tax Cap Law

Value of a Zionsville Home at the 1% Property Tax Cap
$ 147,100 Gross Assessed Value
   - 45,000 Standard Deduction
$ 102,100
   - 35,735 Supplemental Deduction ($102,100 X 0.35)
$   66,365
    - 3,000 Mortgage Deduction
$   63,365 Net Assessed Value of Home
  x 2.5584 Zionsville Town Pay 2013 Total Property Tax Rate (per $100 of assessed value)
$1,621.13 Total Pay 2013 Net Property Tax Liability
$1,471.00 Property Tax Cap ($147,100 X 0.01)
  + 150.49 School Referendum Adjustment ($63,365 X $0.2375 / $100)
$1,621.49 Maximum Property Tax Allowed by Property Tax Cap Law

Boone County Financial Management
(Handout Page 4)s

Sources:
http://www.city-data.com/city/Lebanon-Indiana.html
http://www.city-data.com/city/Zionsville-Indiana.html

Estimated median house or condo value in 2011:
$112,076 Lebanon
$332,853 Zionsville
$122,400 Indiana

Estimated per capita income in 2011:
$21,468 Lebanon
$48,752 Zionsville

Estimated median household income in 2011:
$42,398 Lebanon
$97,603 Zionsville
$46,438 Indiana