INDIANAPOLIS| The financial futures of some of the region's oldest cities soon could fall to a new state board controlled by the governor.
East Chicago, Gary, Hammond and Whiting all face tough budget choices within the next two years because of revenue-stripping property tax caps signed into state law last week.
If those cities, and perhaps other local governments in Northwest Indiana, can't cope with the changes, the last resort will be asking for help from the Distressed Unit Appeal Board. The nine-member panel of state bureaucrats and local government officials, whom have yet to be seated, would craft multi-year plans to slim city budgets and ease the immediate impact of the caps.
"I hope that it will be sort of a mutual work in progress as opposed to somebody coming in front of somebody else and begging for mercy," said state Sen. Luke Kenley, R-Noblesville.
Kenley, a co-architect of the General Assembly's newly minted tax restructuring plan, created the appeal board with Whiting in mind. The tiny lakefront city and its sanitary district stand to lose more than $611,000 next year and $1.5 million in 2010 to the new property tax caps.
"More than likely, we're going to proceed as though we will make an appeal," Whiting Mayor Joe Stahura said.
Whiting's projected 2010 revenue loss represents roughly a tenth of what the city and its sanitary district would have collected in property taxes.
The new tax caps, which will be phased in between now and 2010, are designed to protect property owners by eventually limiting tax bills to 1 percent of assessed value for homeowners, 2 percent for landlords and 3 percent for businesses. Government debt is excluded from the caps in tax-heavy Lake County until 2020, so homeowners there can expect to pay an average of 1.2 percent of assessed value in annual taxes, or $1,200 on a $100,000 home.
The Distressed Unit Appeal Board could postpone or raise the 3 percent cap for the BP Whiting refinery, a move that likely would mean a quick fix for the home city's budget woes.
The answers won't be so easy in East Chicago and Gary, which stand to lose $23.2 million and $45.6 million respectively to the new tax caps in 2010. Both cities will have to figure out how to preserve vital services such as police protection and trash pick up while seeing their property tax collections slashed by more than a third.
Right now it's a little too early for us to say exactly what we're going to do because we don't know exactly what this (legislation) has done to us," said Gary Mayor Rudy Clay.
A spokesman for East Chicago Mayor George Pabey said it was too soon to say how the city will get by without the $18 million the property tax caps will take away next year.
East Chicago and Gary would have to come up with some answers before approaching the Distressed Unit Appeal Board, which will demand a financial plan from all petitioners.
The state panel might want to know why Gary borrowed millions from its sanitary district in recent years or what East Chicago has done to pare its notoriously heavy payroll. And it should come as no surprise if the board prods the two cities to follow Hammond's lead and cede municipal health departments to the county.
Hammond Mayor Thomas McDermott Jr. hopes to avoid the Distressed Unit Appeal Board by pushing for a county income tax or plugging city budget holes with riverboat casino cash.
"I don't think they're going to feel too sorry for the northern cities," McDermott said.
