CROWN POINT | Lake County officials worry the only thing worse than passing a new tax would be passing one that leaves county government still millions of dollars in the hole.
County officials who once denounced a local option income tax as a downstate Republican conspiracy have been quietly calculating its potential to rescue local government from financial peril caused by declining government revenues.
They have been studying a bewildering array of income tax variations and distribution formulas to find a combination generating the most revenue and least taxpayer outcry.
Tension among county officials faced with this challenge was on display last week when state Sen. Ed Charbonneau, R-Valparaiso, unveiled a new income tax model.
It offers Lake County an incentive to pass a 1 percent income tax by unfreezing its property tax levy and giving local officials the freedom to spend three-fourths of the estimated $96 million the tax generates on any government operational need.
The remainder goes to economic development projects, such as South Shore commuter train extensions.
County officials first reacted with skepticism to Charbonneau's initiative, saying their experience with the General Assembly has taught them to duck when its helping hand was extended.
"We hadn't heard anything about it before, so it immediately raised all of our suspicions," Lake County Commissioner Mike Repay, D-Hammond, said.
Charbonneau said, "I was surprised I was getting all this negative feedback on something I thought was going to be a hugely popular, very positive influx for economic development in Lake County, so if the county council wants to tell me they don't like it, I can pull it out."
Repay said, "Upon further review, this has a possibility of being very helpful. I'm thankful Sen. Charbonneau went the extra mile to help us."
A bi-partisan delegations of local legislators added their support to the new tax initiative, which is expected to receive a full Senate vote this week before moving to the Indiana House of Representatives.
Lake is the only county in the state that hasn't adopted a local income tax and is being punished for its refusal by the General Assembly, which has frozen the total amount of property taxes, called a levy, collected annually since 2007.
The freeze, combined with property taxes caps, has forced county officials to shrink their payroll by 300 jobs and borrow $15 million this year to avoid either deficit spending or even deeper cost-cutting.
Repay said he has been reviewing his opposition to an income tax as he looks for ways to find additional money, including $5.3 million to pay a federal mandate to improve the county jail inmates' medical care, and an additional $3 million to consolidate E-911 emergency police and fire communications as the state demands.
"I agree there is money to be saved in county and municipal government, schools and libraries, but I don't know if those savings are equal to our shortages," Repay said. "I don't think we will be able to cut our way out of this. It's taken a long time and a lot of investigation to come to that conclusion.
"I just spent a couple of days at the state legislature, and those people continually beat up on our elected officials because of a lack of an income tax. They have us in a stranglehold. I'm thinking maybe we should remove that as an excuse," Repay said.