By John Estridge
County councils in Indiana are going to have a very unenviable job this fall: They have to set 2021 budgets without really knowing how much costs are going to go up and how much revenue is going to go down.
Much of this is caused by COVID-19 and the ensuing shut down, which ate into state and county income tax revenue, gas tax revenue and may change property tax-related assessments in the long haul.
Thursday, June 18, a financial analyst met with Union County Council (UCC) members and discussed an option to increase the Local Option Income Public Safety Tax (LOIT) to its optimum level, 2.5 percent. Currently, it is at 1.75 percent, according to Jason Semler, CPA with bakertilly Municipal Advisors.
Semler was invited to the county council meeting to give a presentation concerning LOIT.
He said the county is currently at 1.75 percent. Of that amount, 1.5 percent is a combination of County Adjusted Gross Income Tax (CAGIT), Economic Development Income Tax (EDIT) and Public Safety. By law the county can add another 1 percent, which would take the three aforementioned taxes together to 2.5 percent. In Marion County, the limit is 2.75 percent.
By raising it by 1 percent to 2.5 percent, the county could raise an additional $145,000, Semler said.
According to UCC President Richard Blank, there are unknown expenditures in the upcoming 2021 budget. He named two of them. They are health insurance premiums are expected to increase and the commissioners need to put out bids for a new ambulance. He estimated the cost of the two items alone could be around $70,000 coming out of the General Fund (GF) that would not normally come out of the GF. And that figure is far from concrete.
Also, Blank asked Semler about how much the COVID-19 and subsequent shutdown will lower income tax revenue for the state and county. Semler replied that is the proverbial $1 million question he gets asked everywhere he goes.
According to Semler, the real income tax hit may not come until 2022. That is because the 2021 distribution is going to be based on 2019 taxes.
“Your 2021 distribution is based on what people earned in 2019,” Semler said.
And Indiana Gov. Eric Holcomb extended the date the state tabulates how much income tax will come in for distribution from June 30 to Aug. 30. This is important because of the COVID-19, income tax filing was extended from April 15 to July 10. So, all of the taxes will not be filed by the usual June 30 cut-off date, Semler said.
Semler said he is not cognizant of the county’s exact financial situation, but he knew the county has dipped into its cash balances, which is not preferred. However, Union County is not alone in its dilemma of having expenses outrun revenues, Semler said.
Council member Chris Rosenberger said if the county provides needed services for the county’s residents, then it is the council’s job to find a way to pay for those services.
“If you’re going to provide the services, you need to pay for them,” Rosenberger said.
According to Semler, during the 2008 recession, income tax revenue was reduced by 10 percent. That is the amount many estimate the income tax revenue will fall due to the shutdown. However, this is new territory as nothing like this has occurred before.
Semler said more unknowns on the revenue side include what will the shut down do to property tax assessments and how will circuit breaker laws affect the county.
Blank pointed out council will have to make decisions on the budget before all the figures will be final. And Semler agreed.
Later in the meeting, council set the public hearing for the 2021 budget to be held at its Aug. 20 regular meeting. The members will also set dates for the budget workshops. Auditor Cheryl Begley said the budget adoption has to be completed by Oct. 17. And she has to have enough time to put everything together to make that October deadline date after council approves the 2021 budget.
Semler said the first step to increase the LOIT tax is to hold a public hearing. A resolution or ordinance must be written for the increase. This must be advertised before it can be passed. If it is voted on when the ordinance is introduced, the vote has to be unanimous, or council will have to take another vote at the next meeting. At that meeting, a simple majority is sufficient for the tax increase proposal to pass.
Semler was asked to get more information on what the impact will be on taxpayers.
In other business, council:
*Discussed the Liberty Town Council agreed to pay up 50 percent up to $60,000 of the cost to upgrade the Public Safety Answering Point (PSAP). Blank said that really made him happy.
According to a Liberty Herald article written by Randulf Teufel, the money will be used to replace the PSAP’s radio equipment. Lightning strikes have really damaged the radio equipment, authorities have stated in the past.
*Adjusted the county’s salary ordinance.
According to Begley, an employee in the Prosecutor’s Office retired. She has not been replaced due to the diminished court activities from the shutdown. A part-time person is currently handling the former employee’s duties and probably will remain a part-time employee until the court resumes its normal activity, authorities said. There was not a line item for part-time help in the Prosecutor’s Budget. Thus, council has to add a line item to pay the part-time employee. While this will save the county money, the county has to do this with an additional appropriation. Begley will prepare the additional.
*There is a need for a crane to finish the repair to the courthouse clock. Begley said there is not enough money in the Courthouse Upkeep Fund to pay for all of the clock repairs, so at some point, council will have an additional for that line item.
*The county received a $2,000 COVID-19 grant.
*Approved a $15,718 transfer from Recorder’s Identity Security Protection Fund to Recorder Perpetuation Fund.
Recorder Lavinia Herzog said she needs to purchase a new server for her office.
*Approved a $1,000 transfer in the Union Circuit Court Budget from Circuit Court Postage to Circuit Court Supplies.
*Approved Kathy Walker for the Union County Library Board. She replaced Erin Hensley, who resigned.