INDIANAPOLIS | Gov. Mitch Daniels takes a dim view of Gary Mayor Rudy Clay's push to delay extensive budget cuts by denying city businesses millions in tax breaks.

A city consultant estimates that Gary, its airport, sanitary and stormwater districts and bus agency collectively stand to lose $36 million this year to property tax caps the governor and General Assembly created last year.

Clay and other city leaders asked a state appeals panel Monday to tweak the caps so that Gary and its sister agencies would need to make only $5 million in budget cuts this year while city businesses would pay $31 million more in taxes.

"That's a good way to make sure the very last job leaves Gary," Daniels said. "I don't think much of it."

The Republican governor's sentiment looms large because one of his top staffers heads up the Distressed Unit Appeals Board that is vetting the city's plea for budget relief. Ryan Kitchell, director of the state Office of Management and Budget, promises to steer Gary officials toward every conceivable cost-cutting avenue before the state panel would clear a path to higher property taxes.

Bill Sheldrake, a state budget analyst under previous administrations and founder of the consulting firm Policy Analytics, estimates Gary businesses pay about 6.1 percent of assessed value in property taxes, or $6,100 on a $100,000 property. The city's proposal would reduce that to 5.5 percent of assessed value this year, so businesses would see some relief.

But the statewide caps promise to limit business taxes to 3.5 percent of assessed value this year, or $3,500 on a $100,000 property, and 3 percent thereafter. Gary officials want the business cap set at 5.5 percent this year, 4.7 percent in 2010, 4.1 percent in 2011 and 3 percent thereafter.

Gary Controller Celita Green told the state appeals panel the city has a 15.9 percent unemployment rate -- more than double the state jobless rate -- and a declining business base that makes financing city government difficult.

"Wouldn't that argue for a lower cap for business instead of higher one?" asked State Budget Director Chris Ruhl.

Other panel members made it clear the board will not wade into the messy dispute regarding whether region steel mills and the BP Whiting Refinery shoulder a fair share of the local tax burden.

That debate has raged locally since 2002, when legislators set in motion a statewide reassessment ordered by the Indiana Supreme Court and shifted tax assessment duties for the mills and BP from local officials to the state. The following year, lawmakers approved legislation -- known as House Bill 1858 -- giving the industrial giants tax breaks on production equipment.

State Rep. Charlie Brown, D-Gary, attempted to rescind the 2003 tax breaks a year ago, but U.S. Steel took out full-page newspaper ads opposing the effort, explaining that Gary Works. the company's largest North America plant, also is its most heavily taxed facility.

The company is taking a more circumspect approach to the city's current bid to hike business taxes.

"U.S. Steel has a good relationship with the mayor and the city of Gary," said U.S. Steel spokeswoman Erin DiPietro. "We have been talking with them about their fiscal concerns. We do strongly support the governor's property tax relief plan. However, we also recognize that the city of Gary has serious budgetary issues that must be addressed."