IU study urges Lake officials to tighten purse strings

2013-08-13T18:15:00Z 2013-08-13T20:35:58Z IU study urges Lake officials to tighten purse stringsBill Dolan bill.dolan@nwi.com, (219) 662-5328 nwitimes.com
August 13, 2013 6:15 pm  • 

CROWN POINT | An Indiana University professor says better money management by Lake County's big cities would help the suburbs, too.

"There is a need for stronger expenditure controls and transparency," Assistant Professor Justin M. Ross, of the IU School of Public and Environmental Affairs, told the Lake County Council on Tuesday morning.

Ross said the first step toward better fiscal government is a deeper understanding by local government officials of the impact of the state's circuit-breaker system, which benefits homeowners who might otherwise be overwhelmed by high taxes but punishes both free-spending big cities and frugal suburban communities alike.

The circuit breaker prohibits local government from charging little more than 1 percent of the assessed value of a primary residence, 2 percent of the value of a rental property or second home and 3 percent of a business's value.

The millions of dollars taxpayers save are being lost to local government, particularly in Gary, Hammond, East Chicago and Lake Station. In those cities, high tax rates result in the circuit breaker vaporizing 4 to 50 percent of their anticipated property tax levy, Ross said.

But the impact goes beyond those four cities, because their taxpayers also send fewer dollars to county government.

The circuit breaker and other revenue shortfalls prompted the County Council to reduce county government spending for the last three years and adopt a new tax on the personal income of all county residents and workers.

Ross estimates county government still will lose $2 million annually from the circuit breaker and urges county officials to create and share their own future circuit-breaker forecasts with neighboring cities, so budget-makers understand the impact their spending plans have on neighboring communities.

He said the County Council also may need greater authority from the state Legislature to make binding recommendations to lower the property tax levy of cities and towns that exceed their circuit-breaker ceiling.

Ross said local government should refrain from granting tax breaks or diverting tax dollars into tax increment finance districts to lure new businesses into their community, because these incentives also lower tax revenue across the county.

He said County Council members should be armed with at least three years of past spending trends to improve their ability to foresee next year's spending needs.

The County Council, which is paying IU $35,000 for its study, has asked the university to provide more detailed information on how to save money for future county government budgets. The cost of that project hasn't been determined.

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