Monday, June 11, 2007

Is A Special Session Around The Corner?

The band-aid approach to property tax relief cobbled together by lawmakers late in this year's session remains tentative at best long after lawmakers went home. The funding of property tax rebate checks rests entirely on the ability of the state's two horse race tracks to quickly put together financing to purchase a franchise from the state's gaming commission to operate slot machines at their tracks and win approval of gambling regulators before year's end. And then there's a potential monkey wrench Gov. Daniels threw into the mix when he announced the track owners would have to share the proceeds from the sale of their license in the event of a sale following the issuance of their new slot machine licenses. Ed Feigenbaum of the Indiana Legislative Insight sees forces coming together to possibly bring about a special session of the legislature. He writes in this week's edition of the ILI:

We have no reason to believe that this will happen, but the two tracks – or even one of them – could decide to call the Governor’s bluff and suggest that the license fees are simply too high a hurdle and replete with too many restrictions to make slots at the track viable under these terms, and opt for a Hoosier form of Russian Roulette by seeking changes in the enabling legislation next year. After all, this is a symbiotic relationship of sorts – though neither the State nor the tracks comes to the table wearing white in this situation – and the imperatives on both sides are not likely to ease any by this time next year.

The Governor has never been quite as keen on the need for property tax relief (especially with the State paying for it) as legislators have been, and he is less likely than lawmakers to be directly blamed for the lack of relief if the tracks back off.

When we posed the scenario to one stunned lawmaker directly involved in the end-game negotiations on all of this last week and asked what would happen if the tracks backed off, the two-word response we received was “Special session.”

As a story in today's Star indicates there is much to be done before the slots at tracks are approved at the state's two race tracks and both track owners are still in the process of trying to line up financing. Karen Eschbacher writes:

"There's an incredible amount of effort that has to be done" before slots can be played, said Ernest Yelton, executive director of the gaming commission.

The commission, for example, must investigate track owners, approve parlor designs, review prospective employees and vendors, and test every slot machine.

All of that takes at least five months from the time an application is submitted, Yelton said. "It's a monumental task," he said . . .

Ross Mangano, chairman of Indiana Downs, said the track is in the process of lining up financing, though he declined to say what avenues he is pursuing. He hopes to have financing in place in about three weeks.

After that, architects will begin designing the slots parlor. Mangano said he expects Indiana Downs to retrofit existing space and build an addition to accommodate the slots.

Rick Moore, general manager of Hoosier Park, said Centaur Inc., which owns the track, is also lining up financing . . .

Feigenbaum also picks up on some of the discussion you've read here following his initial report about property tax increases being much higher in Marion Co. than lawmakers had anticipated and the resulting voter reaction in this election year:

In April, we were first to explain to you that in Marion County, preliminary numbers suggested that business assessments would increase by single-digit percentages, thanks to assorted factors, and “will likely produce larger than expected tax shifts to homeowners across Marion County.” When we reported in some detail about this phenomenon, Advance Indiana picked up on it, and the comments on that local blog flew in fast and furious. One Marion County township assessor disputed our analysis, but quickly found herself overwhelmed by additional comments from those who understood and followed the process who confirmed our analysis. And now, Peter Schnitzler reports in the Indianapolis Business Journal that former Indiana Department of Local Government Finance chair Beth Henkel confirms that “some Marion County homeowners soon could see property-tax increases of as much as 50 percent – far higher than government officials previously estimated.”

If you don’t think voters are going to be irate about large property tax bills and confusing small rebates (Does this go to my mortgage company or me? Will my escrow be skewed this year or next because of the rebates?), they certainly will be when they are reminded next year that lawmakers found time to grant themselves raises, but ran out of time to find a long-term solution to reliance on property taxes . . . and that the property tax relief for “Pay 2007” taxes was one-time only, and based entirely upon the hope that the two pari-mutuel horse-racing tracks will choose to and be able to raise the money they need to expand their gambling facilities to include slot machines.


Wilson46201 said...

Last week I was querying some friends in the C-C Bldg about the impact of the projected property tax increases. Apparently the new assessments will be mailed out first and then the actual tax bills. Assessments are often hard to understand -- I suspect most homeowners will sort of ignore those notices. When the taxbills arrive: the tsunami will hit bigtime.

An old-timer expert says he expects the removal of the inventory tax to likely hit the doughnut townships more than Center. Those townships picked up a lot of the big-box stores with huge inventories - none of those inventories will be taxed now and the homeowners will have pick up the slack.
The businesses that paid the most inventory tax are new-car dealerships -- those are exclusively in the doughnut.

Anonymous said...

Much can be written about property taxes and their increases. But here are some facts:

1. It is NOT the legislature's job to lower our property taxes. Never was.

2. It IS the legislature's job to put into place a system for local units of government to levy taxes for their services.

3. The legislature got involved in this nonsense in 1973 under the Bowen tax plan. It was pushed by farmers then, who were irate at their tax increases. It doubled the state sales tax, from 2cents to 4, and put most of the increase into the (then-new) Property Tax Replacement Fund. But as with any governmental unit, they didn't return all of the new sales tax to local units of government. The agency responsible for oversight of that funds transfer started in 1973 with about 15 employees. Today? Over 400.

4. For far too long, commercial property owners, in most (but not ALL) cases, paid too much of the burden. A slight shift of the overall burden to residential taxpayers, mandated in part by Tax Court Judge Fisher's 1999 ruling, was not mediated until 2005 by the legislature.

5. Trending, or the move to real property values based on comps, was the final part of Judge Fisher's ruling, and it's being implemented now.

It did not take a genius to conclude, that the perfect storm of trending, reassessment and a small shift in the ratio of commercial vs. homeowners, would amount to an overall mess.

The answers?

1. Make the legislature stay out of it. Their constant meddling around the edges, to appease voters, has, for 30 years, compounded the problem.

2. Make local units of government the culprit, which they are.

What will likely happen?

Indiana voters and their legislators will go around the barn to get there, and adopt some really restrictive cost controls on local units of government.

That helps by a small amount. But that, again, is not their job.

We need to insist that local units of government, predominantly schools, live within their means, or live with the results.

And whoever thought up this rebate check idea needs to be publicly flogged. The thought process behind that is frighteningly deceptive and condescending to Hoosier voters.

Anonymous said...

The legislature's choice to cap the PTRC has had a major impact on tax rates in local communities. That idea was ushered in during the '05 session.

The legislature has also failed to index any of the credits given (e.g. over 65, Homstead, disabled veteran, etc.) and therefore you are going to see senior citizens heavily hit by these increases. It'll make for a good buyer's market in older, more established neigbhorhoods as those on fixed incomes will have to get out of their homes, ASAP, when these bills come.

Good job legislature.

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