INDIANAPOLIS | The city of Gary got a $23.5 million reprieve Wednesday from new state property tax caps but still must make at least $11.25 million in budget cuts by the end of the year.
The Indiana Distressed Unit Appeals Board approved a one-year plan designed to keep Gary's agencies afloat while still giving city property owners about a third of the tax relief state legislators engineered last year.
The first-of-its-kind decision requires Gary to hire an outside consulting firm to oversee cost cutting, which will include unspecified employee layoffs.
MORE: Read the Indiana Distressed Unit Appeals Board's final report on Gary's request for relief from new state property tax caps and the resolution adopted Wednesday by the appeals board.
"It could have been worse. It could have been better. And now we look toward the future," Gary Mayor Rudy Clay said after Wednesday's hearing in Indianapolis. "There will be some layoffs ... There will not be any layoffs of our police, and there will not be any layoffs of our fire(fighters)."
Clay then said the city also may decide not to fill some open positions on the Police and Fire departments.
Ryan Kitchell, chairman of the appeals board and director of the Indiana Office of Management and Budget, said bringing in an outside firm to monitor Gary's finances was key to the relief plan, given the city is expected to petition the state panel again next year
"We have to sign off on the contract and who is selected," said Kitchell, an appointee of Republican Gov. Mitch Daniels. "We're going to have somebody up there looking at every time they spend money - all of the (budget) line items in a great level of detail."
Gary Controller Celita Green confirmed the need for further layoffs, but she could not estimate how many of the city's roughly 1,100 employees will be affected. The city itself now faces about $7 million in budget cuts this year, while the Gary Sanitary District received no relief from the new tax caps and could be forced to raise fees to offset a $3.9 million deficit.
Aside from ruling out public safety layoffs, Clay and Green provided few clues Wednesday as to how city government will close the budget gap. Consolidating city departments, privatizing the Genesis Convention Center and asking the county to absorb the city Health Department are among potential options.
Meanwhile, the Gary City Council must meet with the governing boards of the sanitary and stormwater districts, Gary/Chicago International Airport and Gary Public Transportation Corp. by June 19 to adopt resolutions in support of the relief plan approved Wednesday.
The five Gary taxing units collectively requested about $80 million in property taxes when they set their 2009 budget late last year, but they now will have to make due with less than $69 million. The revenue loss was triggered by statewide property-tax limits legislators set last year to soothe disgruntled taxpayers.
Lawmakers created the Distressed Unit Appeals Board to hear pleas from local governments that stand to lose at least 5 percent of their property-tax collections to the new tax caps. Gary was the only city to petition the board this year, though the state panel also reviewed and denied an appeal from the Beech Grove library district near Indianapolis.
The ruling Wednesday also means Gary property owners won't see as much property tax relief this year as their counterparts elsewhere in the state.
For homeowners, the property taxes they pay later this year to fund Gary city government will continue to be capped at 2 percent of assessed value, or $2,000 on a $100,000 home. But the portion of their tax bills that fund Gary schools, county government and Calumet Township will be capped at 1.5 percent, or $1,500 on a $100,000 home.
All told, the ruling means Gary homeowners will pay less than 2 percent of their home's values in taxes this year, instead of enjoying the 1.5 percent limit afforded the rest of Indiana. Gary landlords and businesses will see the city government portion of their tax bills capped at 3.27 percent and 4.55 percent respectively this year, instead of the 2.5 percent and 3.5 percent caps in place for the rest of the state.
