Valpo survives low tax collections by underspending

VALPARAISO | Somehow the city was able to make more with less in 2011.

Despite receiving only 88 percent of the property taxes it levied to collect in 2011, the city managed to end the year with a balance that was $1 million more than it had at the end of 2010. Clerk-Treasurer Sharon Swihart said that was because department heads spent even less than she asked.

Swihart said the Porter County auditor, treasurer and assessor met with city officials early in the year and warned them to expect tax collections to be lower than previous years. Swihart said she expected only about 92 percent of the $17.5 million budgeted for the six funds that rely on property taxes, so that's what she asked department heads to spend.

Diminishing returns have been the norm in recent years. In 2008, the city got almost 99 percent of its total levy, which Swihart said was the norm in the past. In 2009 the city got just 95 percent, a shortfall of $855,878, and in 2010 it got 93 percent, a shortfall of almost $1.2 million.

The shortfall in 2011 was slightly more than $2 million of the $17.5 million levied. The general fund took a $1.6 million hit and the parks department was $221,000 below expected revenue. The bond and interest fund was $95,000 short, and the city had to transfer money from the rainy day fund to make up the difference.

Asked to underspend their budgets by 8 percent, department heads reduced spending even more to help weather the shortfall. The city also received a little more in some funds than the original estimates. Swihart said more was received from building permits and liquor excise taxes than estimated. Center Township also paid $400,000 for the firetruck stationed on Tower Road that hadn't been in the budget.

The estimated amount lost because of the property tax caps was about $1.4 million of the $2 million shortfall. Much of the rest could be from refunds from appeals of previous years' taxes. City financial consultant Carl Cender will review county records to determine the exact reasons for the shortfall.

"This is the first year we didn't get any advances of property taxes from the county, but as long as the tax payments are on time, which they were this year, it's OK," Swihart said. "We need the payments by the end of the year to make bond payments and still go into the new year with a balance.

"I was really pleased we were proactive on this. We were able to go through with the department heads and tell them we were not going to get the full amount. It really paid off. We didn't end up in worse shape than we started the year."

If the city had gotten close to its full amount, Swihart said it wouldn't have had to borrow at the beginning of the year to pay bills until the first taxes are received in June. The city borrowed more than $3.5 million from the Indiana Bond Bank to combine with its rainy day fund to pay operating expenses until then.

"It was only a 1.02 percent interest rate, so it is small," she said, "but it would be nice not to have to do it."