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Gary, Lake County square off on income tax formula

Gary Mayor Karen Freeman-Wilson testifies before the Indiana General Assembly's Interim Study Committee on Fiscal Policy at Purdue University Northwest in Westville.

WESTVILLE — Gary and Lake County officials went head-to-head Thursday in a battle over the distribution formula for Lake County income taxes.

Mayor Karen Freeman-Wilson wants the Legislature to change the distribution formula for local income taxes to match what the other 91 counties do, she told the Indiana General Assembly’s Interim Study Committee on Fiscal Policy on Thursday.

Lake County has a 1 percent income tax that goes directly to property taxpayers; other counties give money to taxing districts, Lake County financial adviser Larry Blanchard said.

“It is true that the Lake County (income tax) distribution is different from the other 91 counties,” said Lake County’s lobbyist, Richard Cockrum, but this taxation issue is complicated. “I’m not sure that any two counties are the same.”

If the distribution formula changes, Gary would gain an estimated $3.5 million per year, Freeman-Wilson said.

But county government would lose nearly $16.5 million, according to a brief prepared by Lake County Attorney John Dull.

Freeman-Wilson said the city has been working to reduce expenses, but revenues have been declining, too.

“There is clearly a cash shortage in the city of Gary,” she testified.

“Toward the end of the year, we just only pay payroll,” she said. Other expenses get pushed off to January.

“It has caught up with us,” Freeman-Wilson said.

The use of $8.2 million in the fire department’s EMS fund to cover shortfalls in the city’s payroll since 2015, as well as covering upfront costs to secure federal Blight Elimination Fund reimbursements, brought this to light, she said.

Lake County eliminated more than 300 jobs, or 20 percent of its workforce, Cockrum said, before enacting the income tax.

“I don’t know if any unit of government went through cuts like this,” he said.

Gary once had 150 employees in its general services department but now has only 30, Freeman-Wilson said.

If the distribution formula for the tax does change, it should be phased in to ease the transition, said state Sen. Eddie Melton, D-Gary.

"These are conversations probably better left at the local level to work things out," said state Rep. Todd Huston, R-Fishers, who is acting chairman of the committee.

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Porter County Government Reporter

Senior reporter Doug Ross, an award-winning writer, has been covering Northwest Indiana for more than 35 years, including more than a quarter of a century at The Times.