CROWN POINT | Local government's financial affairs aren't on the rocks yet, but Lake County's elected officials can hear the roar of the breakers -- the circuit breakers.
Those in county, township and municipal government are drawing up their 2013 spending plans without the benefit of more than $109 million in property taxes they would have collected from property owners if the state's circuit breaker system hadn't put a ceiling on taxes anyone must pay on an individual parcel of real estate.
Lake government budget-makers also must contend with a 4-year-old property tax-levy freeze that state legislators imposed on Lake officials because they refused to impose a local option income tax.
Lake officials are talking about borrowing around $20 million just to make ends meet next year alone.
Community leaders in Hobart and Merrillville are so cash-starved they have begged the county to impose the wildly unpopular income tax. Hobart has joined a lawsuit filed by county police to have a judge declare the levy freeze unconstitutional.
Meanwhile, Lake residents, who have only seen their property tax bills go higher over the last decade, might be excused for wondering where all of local government's tax revenues have gone.
Lake County officials say too much of that money is fattening the bottom lines of Lake County's industrial giants.
Larry Blanchard, a consultant for the Lake County Board of Commissioners, said county records indicate the taxes big industry pays have dropped a combined $86 million in the last decade, thanks to legislation passed in 2003 that reduced land values and the tax value of their industrial equipment. Those companies include U.S. Steel's Gary Works, ArcelorMittal's East Chicago plant and the BP Whiting Refinery.
Dan Lowery, president of Calumet College of St. Joseph, argues the decision to grant tax relief to big industry was a benefit to all in Northwest Indiana.
"The steel industry was still hurting when that happened," Lowery said. "The boom in steel started right after that. That also was before BP committed to its ($3.8 billion) expansion project. The investment they made in that plant, could have been made elsewhere."
Jill Ritchie, director of public policy and state governmental affairs for U.S. Steel, said, "Improvements in the state of Indiana's property tax structure have allowed companies like ours to reinvest in our facilities. Over the past decade, U.S. Steel has invested more than $1 billion in capital in our plants in Northwest Indiana.
"The most recent example of such reinvestment is the new $200 million Carbon Alloy Synthesis Project at Gary Works. These investments secure high-quality, family-sustaining jobs within our company, generate hundreds of construction jobs -- and create significant business opportunities for other local businesses and service-providers and their employees," Ritchie said.
Lowery added, "It's hard to imagine U.S. Steel closing, but over time, every time there was an investment opportunity it would go elsewhere. It would be a slow bleed, and the loss of jobs would spread not only to the immediate contractors who provides goods and services to those industries, but also all the furniture stores, the grocery stores," Lowery said.
But with heavy industry paying less, Blanchard said the burden of supporting local government has shifted to homeowners, who once paid less than a third of the cost of local government. They now contribute nearly half the total.
Lake Assessor Hank Adams said residential properties on Gary's Lake Michigan shoreline are being assessed more than 15 times higher than than nearby U.S. Steel acreage.
Sticker shock hit in 2004 when residential and small-business tax bills more than doubled in many north county communities. Homeowners pushed local officials into an early version of a circuit-breaker system that capped homestead property tax bills at 2 percent of assessed value.
The taxpayer revolt spread downstate two years later and the General Assembly to enact even lower tax caps, now enshrined in the state Constitution.
The caps protect taxpayers at the cost of local government, as does the overall freeze on Lake's total property tax levy, which began bleeding $15 million in revenue from government in 2008.
Lake County Commissioner Roosevelt Allen, D-Gary, said, "In 2007, I traveled to Indianapolis and talked to several legislators down there about how the assessments had been lowered on the integrated mills and the obligation shifted to smaller businesses and homeowners. They didn't seem very concerned about it -- and then they imposed the levy freeze.
"We were forced to do more with less and become a more efficient county. We reduced employees and consolidated departments, centralized a lot of our services, cross-trained a lot of employees.
"I realized then and now that it is inevitable we are going to have to adopt the tax, because it's the only alternative the state Legislature gives us. It doesn't make sense to borrow money or issue bonds for operating expenditures. That is a greater cost to taxpayers because they have to pay administrative costs and interest on the bonds, and it doesn't solve the problem in the long term.
"If we are going to be leaders, which is why people elected us to office, we have to stand up and make the hard decisions. I believe we have to adopt an income tax. We have to move forward. As government, we have to provide certain essential services to the citizens. If the citizens have to pay an income tax, they are simply investing in their own quality of life," Allen said.
Lowery said, "There really does need to be a county option tax, but we are paying the price for many decades of wasteful government. People are no longer willing to believe Lake County can do anything efficiently or honestly."