Council holds the line with no LOIT increase (they hope)

The Carroll County Council realized in the fall of 2008 that due to state mandated property tax reform there would be a shortfall in county revenue if a local option income tax was not adopted. The financial advising firm of Barnes and Thornburg was hired to help the council navigate the tax rate adoption waters so as to minimize the impact to county wage earners, yet produce adequate county revenue to supplant the loss of property taxes.

The state statute, which determines the circumstances in which a county can implement the tax, was studied and discussed. The law dictated that the county impose a tax rate, double the amount needed for revenue in the first year, to create a “stabilization fund” to be used in the event county revenue falls short of projections. The “stabilization fund” cannot be utilized for any other purpose and would merely exist until a revenue need arose.

It was the consensus of the council last year that no more tax should be collected than was needed. It was determined that a .1 percent tax would be sufficient for the need and the situation would be reviewed after the first year to determine if additional revenue would be necessary.

Council members adopted an ordinance which detailed that a .2 of one percent tax would be established for the first year in order to create the “stabilization fund.” The tax rate was expected to be reduced to .1 of one percent the second year to accommodate the financial need of the county, but the council determined a slightly higher tax rate would be needed for 2010.

However during the review process, it was learned the state statute would not allow a council to reduce the LOIT rate once it is established.

Council members met Friday with Jeff Volz from the Indiana Department of Local Government Finance (DLGF) to receive clarification about the situation because if the tax rate was to change, per the ordinance enacted by the council in September 2008, Friday was the deadline for any action needed.

Volz told council members Friday they committed an error by stating a double tax rate for the first year in the ordinance, even though that was the recommendation by the financial advisors.

Volz said DLGF was the entity which does the math and does the doubling of the tax rate for the first year. However, DLGF did not do that math. County residents were taxed at a rate of .2, not .4 of one percent.

“I come to you dumbfounded,” commissioners attorney Barry Emerson told Voltz. “This council did the math in the ordinance. When everyone in the county who works was taxed .2 percent it seemed the council had done exactly what they

needed to do.”

“A new tax must be Community adopted by Nov. 1 and I’m not working tomorrow (Oct. 31), so this has to be understood today.”

“We followed the directions,” Carl Abbott said.

“We doubled the rate for the first year and now it is time to amend that,” Jerry Hendress added.

“Whose job was it to do the math?” Scott Ayres asked.

Voltz reiterated that it was the duty of DLGF to double the rate and then admitted DLGF did not do that.

Council president Ann Brown summarized the situation.

“It is my belief that we will have enough revenue to get through 2010 but we may be forced to increase LOIT for 2011,” she said in a follow-up interview. “The disappointment of discovering our hired counsel and the DLGF followed different interpretations of the tax law enacted by our legislators as part of property tax reform was and remains very frustrating.”

The next council meeting will be Nov. 27 at 8:30 a.m.