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Clerk-Treasurers Conference

Clerk-Treasurers Conference. Department of Local Government Finance Dan Jones Assistant Director, Budget Division Fall 2010. Overview. 2010 Budget Status 2011 Budget Outlook Budget and Property Tax Controls Exceptions to Controls Circuit Breakers 2010 Legislation On-Line Budget Program

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Clerk-Treasurers Conference

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  1. Clerk-Treasurers Conference Department of Local Government Finance Dan Jones Assistant Director, Budget Division Fall 2010 Indiana Department of Local Government Finance

  2. Overview • 2010 Budget Status • 2011 Budget Outlook • Budget and Property Tax Controls • Exceptions to Controls • Circuit Breakers • 2010 Legislation • On-Line Budget Program • Q & A Indiana Department of Local Government Finance

  3. DLGF Responsibilities • Ensures property tax assessment and local government budgeting carried out in accordance with State law • Publishes property tax assessment rules • Annually reviews and certifies tax rates, budgets and levies of every political subdivision in State • includes all counties, cities, towns, townships, school corporations, libraries, and other entities. Indiana Department of Local Government Finance

  4. 2010 Budget Status • 85 counties billed “on-time” – May 10 due date • First time since 2002 • 87 budget orders issued by late March • 2 counties issued provisional bills • 91 counties should distribute final property tax distributions by 12/31 Indiana Department of Local Government Finance

  5. 2011 Budget Outlook • Goal: On-time billing in 91 counties • Received NAVs from 67 counties • only 17 received as of last year at this time • Budget review begins in November. • Processing additional appropriations until Dec. 15th • May schedule public hearings before 1782’s issued. • Many counties will have Budget Orders before Jan 1st! Indiana Department of Local Government Finance

  6. 2011 Budget Update • 2011 NAVs slightly below 2010 values • Income tax distributions for 2011 lower • based on collections from 2009 • Little change in most tax rates and levies from 2009 to 2010 • Reassessment began July 1st • Completion and effective date: March 1, 2012 • Will show for taxes due and payable in 2013 Indiana Department of Local Government Finance

  7. 2011 Budget Reminders • TIF neutralizations must be submitted before NAVs can be certified. • Submit only the signed TIF neutralization forms • Will not process unless signed forms received • Include TIF district name at bottom of form. • Normally processed and approved the same day received. Indiana Department of Local Government Finance

  8. Budget and Property Tax Controls: Overview • Budgets: financial plans that include both revenues and expense over a specific period of time • Budget Approval: provides the units with authority to “spend” and approve taxes to support spending. • First by locally elected or appointed officials • Then by the DLGF Indiana Department of Local Government Finance

  9. Budget and Property Tax Controls: Local Role • County councils required to make “non-binding recommendations” to units with elected fiscal bodies that levy a property tax. (IC 6-1.1-17-3.5) • County councils adopt budgets for units with appointed fiscal bodies if budgets increase more than the AVGQ. • Failure to comply with above results in a “frozen” budget and levy for the next year. Indiana Department of Local Government Finance

  10. Budget and Property Tax Controls:DLGF Role • Reviews and modifies tax-supported funds to remain within parameters of law. • Increases allowed as long as they are within the maximum levy. • Certifies the budget, tax rate and tax levy for tax-supported funds. Indiana Department of Local Government Finance

  11. Budget Controls • September 17 was last day to submit budget to county for “non-binding” review • 45 days before civil taxing unit is to adopt the budget, rate, and levy • October 15 is last day for county council to complete review and issue “non-binding recommendation.” • County council determines the format of budget to submit and the date of review. Indiana Department of Local Government Finance

  12. Levy Controls • With a few exceptions, maximum levies may increase by the statewide average growth in non-farm personal income. (Excludes years of reassessment, first year of trending 2006 pay 2007, and 2008 pay 2009 for new Homestead Deduction.) • Debt service fund and cumulative capital development funds (CCD only) outside of maximum levy controls. • Debt service = “need based” • Cumulative funds = “rate controlled” Indiana Department of Local Government Finance

  13. Adjustments to Maximum Levy • HEA 1086-2010 allows the DLGF to adjust maximum levies if a unit was below their max in the previous year • Unit must request before Sept. 30, 2010 • Unit’s actual cash balance must have decreased due to lower levy (below maximum allowed) • Adjustment is less than or equal to amount of cash used • Reduction was not result of transfer to Rainy Day Fund Indiana Department of Local Government Finance

  14. Exceptions to Levy Controls • Cumulative Capital Development Funds are outside of maximum levy controls if at 1984 levels(Max rate of 0.05 in “adopting” and 0.04 in “non-adopting” counties) • Cities and Towns may adopt a combination of cumulative funds, but only total rate up to 0.0167 is outside max if no CCD (0.0167 in adopting and 0.0133 in “non-adopting counties) • Property tax levies and rates adjusted for trending • Cumulative Fund must be re-established to increase the tax rate Indiana Department of Local Government Finance

  15. Cumulative Funds Available to Cities Indiana Department of Local Government Finance

  16. Exceptions to Levy Controls • Excessive Levy Appeals Available (5) • Extension of Services / Annexation / Consolidation • Emergency • Three-Year Growth • Correction of Advertising or Math Error • Shortfall (not caused by Circuit Breaker) • Subject to DLGF approval Indiana Department of Local Government Finance

  17. Exceptions to Levy Controls • Appeals must be included in annual budget and advertised as an excessive levy appeal • Fiscal body must include with budget adoption or may be a separate ordinance/resolution • Units must file an application by October 20 unless for shortfall appeal • Shortfall appeals may be filed until December 30 • Later filings may delay Budget Order! Indiana Department of Local Government Finance

  18. Circuit Breakers • “Property Tax Caps” • Limit taxpayers’ liability for property taxes to percent of gross assessed value of taxable property: • 1% for homesteads (primary residence) • 2% for non-homestead residential and agricultural • 3% for commercial & industrial • Constitutional question on November ballot Indiana Department of Local Government Finance

  19. Circuit Breakers • Property tax liability may increase up to cap when property values increase • If value increases from $100,000 to $150,000, liability may increase from $1,000 to $1,500 • Circuit breaker credits cannot be recovered by increasing property taxes Indiana Department of Local Government Finance

  20. Circuit Breaker Credit ImpactSource: 2010 Abstract of Taxes Charged Indiana Department of Local Government Finance

  21. Circuit Breaker • Credits are proportionately distributed to ALL funds (except exempt) on basis of their certified rate. • If a debt service fund is affected by credits, the unit must fulfill debt obligation by using other funds. • Units (except schools) not permitted to transfer funds to a debt fund from other funds • Must appropriate monies from other funds to pay the shortage • State permitted to withhold LOIT shares to fulfill debt obligation (May 5, 2010 Memo.)

  22. Circuit Breakers • Debt Service Funds affected by Circuit Breaker Credits: • Most units will have sufficient operating balances in debt funds to cover shortages • Offers most flexibility to units of government by allowing unit to choose how to cover debt fund shortages, if they occur • Exempt: Construction, school operating levies, and pre-July 2008 debt service in Lake and St. Joseph counties are exempt Indiana Department of Local Government Finance

  23. Sample Circuit Breaker Calculation: Homestead Property Indiana Department of Local Government Finance

  24. Sample Circuit Breaker Calculation: Commercial Property Indiana Department of Local Government Finance

  25. Circuit Breaker kicks in when…. • Total of all tax rates in a tax district exceed circuit breaker threshold • Large amount of property tax supported funds • Large amount of debt supported by property tax • Large amounts of property values captured for TIF Indiana Department of Local Government Finance

  26. Property Tax Trend • National trend: Reduce tax burden on property owners • Percentage of Local Revenue From Property Tax 1999 44.2% 1997 45.3% 1987 45.9% 1977 59.0% 1967 66.2% Source: U.S. Census Bureau, Census of Governments, available at http://www.census.gov Indiana Department of Local Government Finance

  27. Tax Policy • IAAO Property Tax Policy Course 402 • Coarse is offered several times a year in different venues throughout Indiana • GFOA • Best Practices in Budgeting and Fiscal Policy • Focus on revenue diversification • Increased use of user fees • www.gfoa.org Indiana Department of Local Government Finance

  28. New Legislation • SEA 281 • Section 5 requires cities and towns to provide law enforcement with body armor • Section 9 allows the unit to use CCI fund to purchase body armor. Indiana Department of Local Government Finance

  29. New Legislation • HB 1086 – • Sec 36: A public question to issue debt for a controlled project is to be approved by the election board and submitted to the DLGF for review and recommendation. • The final language to appear on the ballot is determined by the election board. IC 6-1.1-20-3.6 (Effective upon passage) • Sec. 61: Fiscal bodies now have until before Nov. 1 to adopt, rescind, or increase LOIT tax rates. • Also changes the effective dates. Indiana Department of Local Government Finance

  30. New Legislation HEA 1086 Section 61 New Effective Dates for local option income taxes Imposes or increases an income tax or tax rate: Ordinance Adoption Date: Effective Date: • Before Oct 1 Oct 1 • Before Oct 16th Nov 1 • After Oct 15 and before Nov 1 Dec 1 Indiana Department of Local Government Finance

  31. New Legislation New Effective Dates for local option income taxes Rescinds or decreases an income tax or tax rate: Ordinance Adoption Date: Effective Date: • Before Oct 1 Oct. 1 or 1st day of month in which it was last increased or imposed • After Sept. 30 and before Oct. 16 Nov. 1 or 1st day of month in which it was last increased or imposed • After Oct. 15 and before Nov. 1 Dec. 1 Indiana Department of Local Government Finance

  32. New Legislation • Sec. 69 and 152: • Amends uses of Cumulative Capital Improvement Fund for cities and towns to include “any governmental purpose for which money is appropriated by the fiscal body of the city or town.” • Sec. 152: A municipality may establish a cumulative capital improvement fund for a purpose described in IC 6-7-1-31.1. Indiana Department of Local Government Finance

  33. Gateway: Online Budget Program • Development of online portal • 3 budget forms • Form 1, Form 2, Form 4B • Automatic load for reporting utilities • Piloting in 7 counties (178 units) • Schools to come online in two years • Annual report to SBoA filed electronically Indiana Department of Local Government Finance 33

  34. For More Information • Dan Jones, Assistant Budget Division Director • Telephone: 317-232-0651 • Email: djones@dlgf.in.gov • News releases from the DLGF • www.in.gov/dlgf • Contact the DLGF • 317.232.3777 • “Contact Us”: www.in.gov/dlgf/2338.htm Indiana Department of Local Government Finance

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