VALPARAISO | The state's new property tax laws not only put a cap on how much property owners can pay, they eliminated the city's ability to levy a replacement tax for the Redevelopment Commission.

They eliminated the tax but not the city's need for the funds.

The City Council approved a replacement levy in 2003 after a change in education funding reduced the amount of property taxes the city could collect from its tax increment financing districts. The levy raised about $300,000 a year, which originally was intended to be used for Redevelopment Commission projects.

In 2004 the commission agreed to return the money to the city to buy equipment needed in the TIF districts. So far it has been used for the lease/purchase of police cars. In exchange for the levy proceeds, the council agreed to let the commission collect a fee for tax abatements in the TIF districts.

With the city no longer able to collect the tax next year but still needing the money to pay off the lease/purchase of police cars for at least a couple more years, the commission at its September meeting agreed to continue to contribute $300,000 a year for the equipment fund to at least 2012.

The money will come from the tax abatement fees and the regular property tax revenue the commission receives on the increased value of nonresidential development in the TIF districts. The commission has been receiving about $3 million a year, but commission Executive Director Stuart Summers said the tax caps are expected to trim that by about 20 percent, or $600,000.

The loss of $900,000 a year is going to force adjustments in the commission's budget and scale back projects, Summers said.

"It's been hard to put a budget together this year," he said. "The engineers (designing city projects) have been understanding, but it's been hard because everybody we meet we have to say cut back. We'll do improvements. It just won't be as much. We haven't eliminated any projects yet. We will just defer some."

One project already facing cutbacks is the Calumet streetscape and sidewalk project between Wall Street and Glendale Boulevard. Summers said it will be built only on the west side for at least the next few years.

In addition, the commission will look for even more federal grants and will seek more contributions from adjacent property owners.