Pat Andrews brings up an excellent point on her blog, Had Enough Indy. The City keeps handing out tax abatements that cost all taxing units millions of dollars in lost tax revenues each year. When those businesses fail to create the jobs they've promised, the City can claw back the benefits it gave to those businesses. Although the City represents only 20% of the property tax levy, it keeps 100% of the funds it claws back from businesses.
There's also the issue of the PILOT revenues the City will receive from Citizens Energy on the sewer utility if the plan to transfer ownership of the water and city utilities is approved. The City is collecting tens of millions of dollars in the form of payment in lieu of taxes from an entity that is otherwise exempt from paying taxes. Yet all of those PILOT revenues are being paid to the City as if the City is the only taxing unit that collects property taxes.
Here's some of what Andrews said about how clever the City has been getting as of late in stealing other taxing unit's revenues:
As property tax caps are now in full effect and a ballot question in November could make them constitutional in Indiana, legal loopholes are being mined by the City of Indianapolis to allow the City to take a tad more than they are due.You might wonder why these other taxing entities aren't speaking out and demanding their fair share of these revenues. It's probably because the people who are supposed to be representing their interests--namely, the big law firms in town they pay to lobby on their behalf--have bigger fish to fry from the work they do on behalf of the City of Indianapolis.
The one power that the City of Indianapolis has that no other taxing unit in Marion County has is the right to grant abatements. Which it seems to do with abandon lately. Just look at the Jeff Swiatek's article in yesterday's Star business section, where he reports an abatement for CSO Architects, Harlan Bakeries, Greatbatch Medical, and Sharp's Academy - all in one fell swoop . . .
The 25th floor, under Mayor Ballard, is very very clever when it comes to finding and mining legal loopholes. I don't want to discourage that sort of thing entirely, since the State wields a heavy hand when telling all cities and towns how to go about their business. Finding a good loophole from time to time could be beneficial.
But, in today's property tax climate, we should all be concerned that the tax revenues are meted out proportionately and therefore fairly.
The Ballard Administration found a loophole in the case of 450 E. Market Street (see "Ludicrous or Clever - You Decide" and "MDC Public Hearing On The TM Miller Enterprises Abatement" and "MDC to Hold Public Hearing on Abatement for 450 E. Market") and were set to abate about $6.7 million in property taxes, get paid that very same amount, and use the money to buy an overpriced garage. In short, the City was planning on taking the tax money that would have gone to the schools and library and township and health & hospitals and keep it for its own. On top of it all, it was going to waste that money on buying a garage that it didn't really need. This deal, even though it passed all MDC and Council votes, has not yet been inked down - and that is a very good thing.
The Ballard Administration found another loophole with the $5 million clawback of abated taxes in the case of Navistar. (See "Abatements - Scary Loopholes Need Closing") And they kept it all -- even though the property tax distribution formula would suggest they 'deserved' only about 20% of it. They kept all the money. Then, they wasted that money by sending it on to the Indianapolis Economic Development, Inc. and the Indianapolis Convention and Visitors Association; two not-for-profits living largely off government largess while paying handsome salaries for its operators.
Now the Ballard Administration has found an even bigger loophole whereby proper apportionment of property taxes is set aside to the benefit of the City over the rest of the taxing units. This one makes the $6.7 million and $5 million deals look like chump change. And this is the loophole on the carve out of the sewer utility from the property tax system.
Indiana Code 36-3-2-10, authorizes Payments In Lieu of Taxes (PILOT) from otherwise property tax free parcels in Indianapolis. Indiana Code 36-3-2-10(d)(4), lists "wastewater treatment facility", which at the time, was owned entirely by the City of Indianapolis.
The City-County Council recently increased the PILOT payments from the sewer utility and authorized the money be used to pay off 30 year bonds for infrastructure repairs. (See "City-County Council Should Vote Down Prop 132") The plan is to sell the sewer utility for another $260 million in cash to Citizens Energy. The sales agreement stipulates that Citizens Energy will not attempt to get the Legislature to change the sewer utility from a tax-free, PILOT paying, enterprise into a property tax paying enterprise. Now, this tax-free status is very different from the gas utility and the water utility - both of which currently pay and which will continue to pay property taxes after this sale goes through.
It's also important to point out that the property tax reform law that enacted property tax caps also included a provision that required the state to pick up about a half billion dollars in debt the City owed in unfunded pension liabilities. Mayor Peterson planned to spend about $25 million a year from his 65% income tax increase for projected annual debt service on that unfunded liability. The City kept all but a few million dollars of the revenues generated from that tax increase each year, which is why the City's budget appears to be in better shape than many local governments' budgets right now. At the same time, all taxpayers started paying a 1 percentage point increase in their state sales taxes as a trade off for the property tax reforms that included tax caps. Now the next time you hear the Mayor or other city officials mention all of those tax revenues they're losing because of property tax caps, remind them not only of the tax increase it kept to pay for a long-term debt of the City's that no longer exists, but how the City is also stealing millions of dollars each year from other taxing districts and using it on questionable expenditures.