Lake County officials blame financial troubles on municipal overspending

2012-11-17T00:00:00Z 2012-11-18T00:27:06Z Lake County officials blame financial troubles on municipal overspendingBy Bill Dolan bill.dolan@nwi.com, (219) 662-5328 nwitimes.com
November 17, 2012 12:00 am  • 

CROWN POINT | Lake officials insist it isn't their fault county government must borrow $15 million so it can spend beyond its means next year.

With little cash on hand and future property tax revenues declining, the county council voted 4-2 Tuesday to commit Lake to deeper debt.

Lake Surveyor George Van Til, whose tax tap was shut off in an austerity move, is asking the council for $750,000 of the loan for a new flood-control project. More requests are bound to come, since the council has no tax dollars in its 2013 budget for maintenance of either drainage or road infrastructure.

Lake County government regularly borrows in the short term to meet its payroll and other operational costs and signs longer-term banknotes for big-ticket items, such as office renovation or vehicle purchases. Its outstanding debt obligations exceed $111 million, according to state figures.

But those loans are secured by property tax collections everyone knows are coming. Now, county officials find themselves in the position of someone who has taken a major pay cut and cannot make ends meet.

Wayne Wietbrock, a retired Lowell-area farmer, asked the council at a public hearing where this was going. "Can we afford to do this in 2013, 2014 and 2015?"

Council President Jerome Prince, D-Gary, said they already have cut more than $30 million in spending over the last three years. County government has reduced its payroll by more than 340 jobs in the last decade, according to Lake County Attorney John Dull.

Councilwoman Christine Cid, D-East Chicago, said, "The council has worked very hard to reduce expenses that aren't necessary, but other cities and towns aren't reducing their services."

 

Source of austerity

Local government here finances its operations primarily from taxes assessed on local real estate. Lake is the only county in the state that does not resort to taxing the income of its residents and workers.

Lake cities, towns and townships are currently home to some of the highest property tax rates in the state. Gary's and East Chicago's rates are more than five times the state's average, according to state records.

This is driven by intense demand for social services from large indigent populations. Municipalities employ hundreds to attend to overall public safety, health, streets and other essentials.

Public disgust with high taxes prompted legislation that first lowered the tax liability of the county's big steel and refinery industries and, later, all business and residential real estate through tax cap credits that put an upper limit on the dollars that can be harvested annually from any one property.

Taxpayer relief through tax cap credits means hundreds of millions of dollars of revenue loss to Lake's local government units over the last decade, according to county records.

That loss is most keenly felt in north county's city halls, but county government suffers collateral damage since it must attempt to extract taxes in those same capped communities.

It all adds up to a $24 million loss in county government revenues in only two years, according to Larry Blanchard, an administrative aide for county government and a former county councilman.

He told the county council last week, "Even if you cut that $15 million this year, you will be right back next year with the same problem because you inherit tax cap credits from other communities. It could be $10 million, $12 million or $15 million next year."

Declines in real estate values have aggravated the problem, Dante Rondelli, financial director for the county council, said.

Rondelli said county government's only hope is that municipal governments voluntarily rein in their spending or the state reform the property tax distribution system to reward county government frugality.

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