Tough review ahead for local government finances

2011-09-03T20:15:00Z 2011-10-06T16:30:08Z Tough review ahead for local government financesBy Bill Dolan bill.dolan@nwi.com, (219) 662-5328 nwitimes.com
September 03, 2011 8:15 pm  • 

CROWN POINT | Lake County's budget expert cautions local cities, towns, townships and other local government units to get serious about cutting spending -- or have austerity forced on them.

"I and my bosses (on the Lake County Council) have gotten serious about tax-cap deficits," Dante Rondelli, the council's administrative finance director, said last week.

He said the council permanently cut $11.2 million in property tax spending on his prediction two years ago the state would reduce county government's share of property taxes under the property tax caps, which voters recently put into the state constitution. The caps are supposed to limit an property owner's taxes to 1 percent of a home's assessed value, 2 percent of a rental property and 3 percent for other businesses.

The Indiana Department of Local Government Finance announced last month county government is losing $11.9 million. Rondelli said the council can deal with the extra $700,000. "We may have some more fat-cutting ahead of us, but I believe we have more of it now behind us," he said.

"Now, everybody else has to get serious," Rondelli said as the County Council prepares to begin reviewing the spending plans of 60 other government agencies, as required by the state now.

The DLGF reported the rest of Lake County's local government units can expect nearly $100 million less in property tax revenues than in the past because of the tax caps.

Rondelli said some of those other government unit budgets appear to be in line with the reductions and should get a "smiley face" from the County Council.

But another group of government units appears to be over the tax limit. Rondelli said the County Council essentially has two choices in its recommendation:

Tell the entities to cut, or go along with the higher dollar amounts but expect to temporarily help bail them out, since Rondelli said another district's tax losses under the caps are shared by all. He said at some point in the near future, a severe reality check could force cities and towns to cut basic services and possibly consolidate with county government.

"We are interconnected," Rondelli said.

"I will have to go to some exotic ways to make up the difference; then we will have to consider consolidations and annexations."

That sounds like an echo of the 2007 Good Government Initiative study, sponsored by the county's largest corporate taxpayers, which demanded county and municipal government save millions of dollars by consolidating parallel services.

Rondelli said some local government units have found a loophole in the caps, borrowing for new construction. He said Crown Point Public Library's 2012 budget is one example.

Crown Point is building a new $12 million library that Rondelli estimates will put the library's 2012 budget into a $400,000 hole -- unless the library district benefits from an unlikely rise in that city's real estate market that would boost its tax base.

Rondelli calls the library's borrowing a form of community debt that nearby taxing districts, including county government, will have to deal with by either helping bail out the library district or recommending a budget cut.

Library Director Lynn Frank said library officials have been frugal and saved in advance as much as they could for the building, which could have cost as much as $15 million. She said they couldn't have foreseen the bad economy that has lowered assessed values and aggravated the tax crisis.

She also thinks Rondelli is being an alarmist.

"I'm sorry Dante is so upset with us. I think he is looking at something that may or may not happen," Frank said. "I was devastated with how he spoke to us because according to the (Indiana Department of Local Government Finance) representative we have talked to, we did our budget according to how he suggested. I don't believe we have overstepped."

In a similar example, Rondelli pointed to the county's Solid Waste Management District, a once-independent taxing district, which currently has a tax-cap deficit of more than $280,000.

At the August solid waste district meeting, board members complained they don't want to surrender control of their budget to the County Council. Rondelli said the state is mandating it.

Some waste district board members questioned why their body continues to exist if the County Council holds ultimate spending authority.

The County Council has set aside three days in late September to grapple further with these issues.

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