CROWN POINT — A state-mandated review by the Lake County Council on Tuesday offered a glimpse into which municipal taxing units will feel the most budgetary pain when property tax caps are fully implemented next year.
Each summer, the Indiana Department of Local Government Finance sends municipal and county governments an estimate of their property tax levy for the following year.
It also sends an estimate of how much the tax haul is expected to be reduced by property tax caps, which limit a property owner’s tax liability to 1% of the assessed value of homestead properties, 2% of agricultural land and 3% of commercial properties.
State law requires county-level fiscal bodies to conduct at their first August meeting a nonbinding review of the levy estimates for all the taxing units within their jurisdiction. The Lake County Council’s review of DLGF estimates confirmed what municipal leaders have known for some time — several Lake County taxing units will tumble off a fiscal cliff come Jan. 1.
Within the civil city category, Lake County’s northern industrial core will feel the most fiscal pain, according to DLGF estimates. Nowhere is expected to be harder hit than Gary, which will see its estimated 2020 property tax levy of $79.8 million reduced by about $54 million, or 68%.
East Chicago, Hammond and Lake Station also will have big levy reductions of 16%, 27% and 46%, respectively.
When property tax caps were enacted in 2008, Lake and St. Joseph counties were given a temporary debt exception because they relied so heavily on property taxes to fund services. But the exception expires in 2020, meaning any remaining debt from before July 2008 will no longer be figured into property tax bills.
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As a result, many property owners will get a break on their taxes while some taxing units will see drastic reductions in their levies. This dynamic has been in play for more than a decade, but it will accelerate for some taxing units more than others.
Calumet Township, which includes Gary and Griffith, will fare the worst of Lake County’s 11 townships when the circuit breaker comes back in full. The township’s estimated levy of $18.9 million is expected to be reduced by $10.4 million, or 55%, according to DLGF figures.
North Township, which comprises Hammond, East Chicago, Whiting, Highland and Munster, will see a smaller yet still significant drop of about 17%, while Hobart Township’s levy will be reduced by about 18%.
Some Lake County school districts could fare worst of all taxing units in terms of how much property tax funding they stand to lose in 2020.
The Gary school district, for example, has an estimated levy of $25.8 million, but the circuit breaker will shave off $22.6 million, or about 88%, according to DLGF. The Lake Station school district fares even worse, with its $1.1 million levy expected to be nearly wiped out to about $26,000 after the tax caps take full effect.
Other school districts facing big reductions in their property tax levies include Lake Ridge at 51%; Hammond at 41%; and Hobart at 28%.
Indiana schools can use referendums to raise additional revenue for operating expenses, and they also receive a significant share of their funding from the state.