Bartholomew County, which has been battling a forecast 2016 budget deficit for weeks, is working through the process of balancing its spending with projected revenue.

Several elected county officials have suggested implementing at least one new tax — including a wheel tax among three new taxes mentioned — as a way for the county to present a balanced budget for next year. However, a majority of Council Council members are resisting taking such a step — at least for now.

It’s not new territory.

The Bartholomew County Council rejected a wheel tax in May 2009, when local people were feeling the grips of the Great Recession. Too many people were out of work at the time and could not afford a wheel tax, council members said then.

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Instead, an economic development income tax was implemented six years ago, which provided more money and, over time, less restrictions.

While Bartholomew County’s jobless rate was 3.6 percent in July — one of the lowest rates in Indiana — anti-tax sentiment remains strong among council members, who are still attempting to offset significant revenue losses with more spending cuts.

But after spending four weeks juggling funds and slashing line-item expenditures to what Auditor Barb Hackman describes as “bare bones,” next year’s general fund budget will still be almost $700,000 in the red on New Year’s Day, according to the latest projections.

In addition, both Bartholomew County Commissioner chairman Larry Kleinhenz and council member Mark Gorbett say the cost-cutting efforts don’t address the county’s long-term needs.

New revenue streams are needed simply to stay solvent and provide basic services, Hackman said.

Wheel tax has been popular

Since 1980, 47 Indiana counties — including neighboring Brown, Shelby, Decatur and Johnson counties — have adopted what is formally called the Local Option Highway Vehicle Tax.Over the years, Johnson County officials have examined whether the wheel tax is still needed and each time have re-approved it because of how much it contributes to the budgets of local street departments.“If we did not have the wheel tax, we would be in serious trouble,” Johnson County highway director Luke Mastin said.

Fees that Johnson County residents have paid to be spent on roadwork have added up to $27 million over the past eight years.

Every year, Johnson County government and municipalities receive about $1.5 million from the wheel tax, and $900,000 of that is spent on road work.

That is about the same as what Johnson County gets from the state each year for road projects, so the wheel tax basically doubles what can be spent on roads, Mastin said.

Since the Bartholomew County Council has not asked for updated figures concerning the wheel tax in six years, Hackman said, she hasn’t attempted to find out how much revenue would be generated today.

There are simply too many variables such as fees and surcharge rates that would first have to be addressed by the council before any comparison between a potential Bartholomew County wheel tax and the current one in Johnson County could be made, Hackman said.

While all local council members certainly would prefer no new taxes, they have discussed the possibility of enacting a local option income tax that would provide $2 million annually.

But so far, neither the wheel tax nor the third option — a cumulative capital development tax — have been seriously considered.

One reason is that wheel tax revenue must be spent on road and street projects, just as money from the cumulative capital development tax is earmarked for new-building construction and renovations.

The council wants flexibility in where funds will be spent, Hackman said.

She added that those three are the only viable new-tax options allowed by the state for Bartholomew County to consider.

Looking for long-term plans

Prior to Tuesday, council members considered both the wheel and cumulative capital development taxes to be insufficient in addressing the county’s current financial crisis.Even though the projected deficit is now less than $1 million, council member Jorge Morales says he would need to see long-term plans for financing buildings, maintenance and medical insurance before considering any new tax.“Until I start seeing those plans, I’m not sure I’m willing to contemplate any tax,” Morales said. “Even then, I would have to think long and hard about how that money is going to be used.”

The retired Cummins executive, who says there are several things that can still be done in each county department to reduce costs, says he believes a new tax will only provide three years of relief from inflationary influences.

Morales and council members Evelyn Pence, Laura DeDomenic and Bill Lentz have been repeatedly described by fellow council member Jim Reed as four elected officials who will never support a tax hike.

In contrast, Reed and two other council members — Gorbett and Chris Ogle — are willing to consider new taxes to put the county back on solid financial ground.

“We really haven’t really discussed the wheel tax,” Reed said. “I would definitely consider it if would be more favorable than payroll or property tax hikes.”

Reed said he could see supporting a wheel tax because “it won’t effect the paychecks of employees, especially the single mother who is trying to feed her family.”

However, he emphasized that Gorbett, a former two-term sheriff, is a strong advocate of the local option income tax, which frequently is referred to as a “public safety tax.”

Data collected in 2008 indicated the wheel tax would generate $1.4 million annually that, by state law, must be split several ways and shared with municipalities, Hackman said.

A number of council members have expressed frustration with the idea of sharing tax revenues, because they are the ones who take the political heat for enacting such taxes.

But for local governments from outside Bartholomew County, the revenue generated by the wheel tax has been significant.

The city of Franklin, for example, collects about $500,000 per year through the wheel tax, which makes up about one-fourth of the money spent on projects, salaries, equipment and supplies, street commissioner Brett Jones said.

In Greenwood, which receives about $1 million each year from the wheel tax, the money is a big help in annual work to repair and repave roads, city engineer Mark Richards said. This year, the city is able to spend about $2 million on road work, he said.

The money has helped Johnson County governments pay for larger projects with a higher price tag, such as a roundabout and a connector road.

Johnson County has also been able to borrow money for those projects, which cost millions, and then pay it back with wheel tax collections, allowing more work to be done at once, Mastin said.

More about wheel tax

While the Local Option Highway Vehicle Tax often is referred to simply as a wheel tax, it’s actually two separate revenue-generating streams. 

Surtax

The first is a surtax that is applied to automobiles, motorcycles and trucks that weigh less than 11,000 pounds.

In Indiana, the excise surtax can rage from $7.50 to $25 per vehicle. The exact rate is often calculated on the original cost and age of the vehicle.

In Johnson County, a flat rate is set at $25 for cars and trucks, $15 for motorcycles and $7.50 for scooters.

Distribution of the $1.5 million collected annually in Johnson County is determined by a funding formula based on population and the ratio of street mileage to county road mileage.

Wheel tax

The second revenue-generating stream is a wheel tax that is mostly charged for commercial vehicles.

The tax may range between $5 and $40 per vehicle.

Larger semitrailer rigs that tend to inflict the most damage to roads, streets and highways usually pay the heftiest charges.   

But counties can enact different rates for each class of vehicles and may have different rates within each class, based on weight.

Both the surtax and wheel tax are paid when owners register their vehicles with the state each year.

Under Indiana law, a county council must concurrently pass an ordinance adopting the excise surtax and the wheel tax. If the vote is not unanimous, it will have to be passed over two separate meetings.

Source: Purdue University

New-tax options

Here are the only three viable options the Bartholomew County Council has for generating new revenue streams, according to County Auditor Barb Hackman.

Local option income tax

Type: Income tax already levied by 19 of Indiana’s 92 counties

Cost: Based on income. For employee making $35,000 a year, the cost would be $1.68 every week.

Stated purpose: Public safety

Amount raised if enacted (based on 2015 data): Columbus, $2.84 million; Bartholomew County, $2.06 million; Edinburgh, $118,000; Hope, $29,000; Hartsville, $2,184; Clifford, $1,203; Elizabethtown, $471. Jonesville would also receive an amount appropriate for its population.

Local Option Highway Vehicle Tax

(Often referred to simply as a wheel tax)

Type: User fee

Cost: Excise surtax on passenger vehicles from $7.50 to $25. A wheel tax on larger commercial vehicles between $5 and $40.

Amount raised if enacted: $1.5 million. Like the local option income tax, funds from the wheel tax would be distributed to all incorporated communities.

Disadvantage: Money is earmarked for highways only.

Cumulative capital development tax

Type: Property tax currently levied by a vast majority of Indiana counties

Cost: 4 cents per $100 of assessed valuation the first year, followed by up to 7 cents annually in subsequent years

Amount raised: $1.4 million annually, beginning in the second year

Disadvantages: 25 percent of money raised through the cumulative capital development tax must be applied toward property-tax relief. In addition, the county would be required to move $694,000 from its general fund into the cumulative capital development fund the first year.

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Mark Webber is a reporter for The Republic. He can be reached at mwebber@therepublic.com or 812-379-5636.