Leah Beyer
Bartholomew County Council members had an overview discussion about decisions they’ll have to make over the next couple of years about instituting a wheel tax or increasing local option income taxes as a result of recent state changes impacting local government finances.
Council members on Monday heard a presentation from financial advisory firm Reedy Financial Group (RFG) who talked about Senate Enrolled Act (SEA) 1— a sweeping local government finance reform package passed last legislative session.
Three important facets of the bill the council discussed after an overview on each from RFG’s Branden Robbins: changes to assessed value and levy collections, the expansion of local income taxes (LIT) and provisions related to the enactment of a wheel tax.
The presentation was part informational, and part what Jorge Morales, R-District 4, repeatedly called a “sales pitch” on behalf of RFG.
Robbins described models they’ve developed that will give members a tangible sense about how certain decisions they may or may not make will impact revenue at the county’s disposal over the next six or seven years.
“One of the reasons why I wanted them to present is because we have the wheel tax that’s been a constant discussion,” said Council President Leah Beyer, R-District 2. “But we’ve not talked much about Senate Bill 1, which gives our body a lot of authority with the local income tax starting in (2028). What they’re (RFG) doing is going to help us think long term about what we need to be doing with pulling our tax levers as we go through this dip and then come back up.”
The dip Beyer was referring to is the amount of revenue county government is going to receive as a restructuring of local government finance plays out over the next several years.
Robbins first ran through a summary of adjustments to assessed value and levy collections, which he said are shifting from a levee-based system to a rate-based system.
“I call it ‘Circuit Breaker 2.0.’ It’s basically a new non-collection of taxes,” Robbins told council members “What we’ve been finding is it adds up pretty quick and it hits you right in 2026. So that’s a part of your tax levy loss in 2026 in that case. And then as that deduction scale phases up, you start to see a shift in our ability to collect on these types of properties.”
RFG has developed a “parcel-level analysis” by county and an accompanying model to see the impact of the new legislation on assessed values and property tax revenue.
“The first piece of it is: what’s going to happen in assessed values, what’s going to happen to the new credits that are coming on and our ultimate ability to collect tax levy,” Robbins said. “… “With the new deductions kicking in… there is a transition point where net assessed value starts to take a bit more of a dive after years two and three, all the way out to year six. That’s when we start to see our tax levy impacts and our ability to collect our taxes change a little bit.”
New options for local option income taxes are what “impacts our counties in the state the most,” Robbins told council members. The local option income tax changes authorize new tax rates the council can enact to fund things like county revenue and emergency services.
“Right now you have the certified shares that go to your general fund, public safety, economic development, you have a jail tax— all that’s gone,” Robbins said. “It’s a whole new system.”
The council in 2027 will have to vote on which local option income tax rates they want and in what area, Robbins told them. The new rates, if enacted, would be effective for 2028.
One change Robbins noted, is to the max county expenditure rate, which was bumped up from 2.5% to 2.9%.
“What this is kind of incentivizing is municipal units that are over 3,500 in population are going to see an increase in income tax,” Robbins said. “Where you guys, as counties, will have a little bit more flexibility to hopefully keep it the same, or maybe even take it down a notch.”
He went on to identify three potential LIT rates the council could choose to enact: a 1.2% rate for county services that would go towards general purpose revenue; a 0.4% LIT for fire protection and emergency medical services; and a 0.2% LIT for conservancy districts and townships, meaning the council could choose to impose LIT rates up to a total of 1.7%.
One of the more-talked about aspects regarding the legislation are provisions included from a House bill related to establishing a legal framework for local government units to enact a wheel tax, which Bartholomew County does not have. Although it’s optional, not enacting one would significantly impact the county’s access to crucial Community Crossings Matching Grant (CCMG) funding. The county has through 2027 to decide whether or not to do so.
The Indiana Department of Transportation (INDOT) has awarded Community Crossing Matching Grant (CCMG) funding to local communities since 2016, the funding for which is primarily from the sales tax on gas.
INDOT has awarded an annual average of $260 million of CCMG-funding statewide since the program began. Bartholomew County has been awarded $10.4 million since 2016, and been required to provide dollar-for-dollar local matching funds for the award amount, which they’ve done with the use of County Economic Development Income Tax (CEDIT) funds.
CCMG funding had been given out over two rounds, with a maximum award of $1 million for the first eight years, which increased to $1.5 million in the past two, meaning that county engineering has had access to up to $3 million in funding annually for road projects.
But House Enrolled Act (HEA) 1461 tweaked CCMG, significantly decreasing the amount of funds local governments have at their disposal and separating out how the funds will be distributed via matching grants, as well as a direct distribution component.
Rather than $260 million in matching grant funds, just $100 million will be awarded. And half of the funding must go to counties and towns with a population less than 50,000, which excludes Bartholomew County.
Essentially, the county will be competing for $50 million in CCMG funds, whereas they were previously doing so for part of $260 million.
The bill allocated $20 million toward financing a railroad crossing upgrade project from 2026 to 2030. In addition, starting in 2027 and each following year, $50 million would be transferred to Indianapolis for use on secondary streets if Indianapolis matches the funds.
Money that is leftover would be allocated to a new, separate, direct distribution fund, that in turn is directed to counties and cities with populations over 5,000 depending on lane mileage. But that funding is only available to units that have adopted a wheel and excise surtax.
In addition, the legislation allows the possibility that individuals could be taxed twice if both the city and county implement their own wheel taxes.
Gorbett said he recently met with Columbus Mayor Mary Ferdon and City Council President Frank Miller, R-District 4, to talk about the wheel tax. Miller had asked the county council make a decision about it by Sept. 1, which the broad swath of the group indicated they were not comfortable doing until they had a better understanding of the changes. Regardless, members said they intend to go into the process in lock-step with their city counterparts.
Beyer mentioned that if they do end up contracting a firm to do some modeling for the county, perhaps they could include the city as well.
Several members commented that they are pleased to have a healthy savings fund to help weather some of these changes if need be, but council member Kim Bennett, R-at-large, observed that “if we’re not cautious, that cushion will dwindle quickly.”
“This whole subject is not going to be very popular with the people that we represent,” Morales said, emphasizing that the council needs to have a solid understand of all of the impacts before they begin making decisions.
Beyer said they would plan to get a proposal for RFG, one from another firm, and see what the auditor’s office can provide before they conduct work sessions to delve further into the details ahead of budget time in August.
