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INDIANAPOLIS | The General Assembly may control how most of the money raised by a Lake County income tax can be spent.

State Sen. Ed Charbonneau, R-Valparaiso, chairman of the House-Senate conference committee for Senate Bill 585, released a proposed compromise version of the legislation Wednesday that would require revenue from a Lake County income tax rate of up to 1.5 percent be distributed in specific ways.

Under the plan, the first quarter percent would go toward property tax relief, followed by a quarter percent each to public safety, the Northwest Indiana Regional Development Authority, county building projects, additional property tax relief and any other economic development purpose.

The spending mandate is cumulative, so if the county adopts a 0.5 percent income tax rate, the money could only be spent on property tax relief and public safety.

The measure does not set a maximum income tax rate, and there would be no state direction on money raised beyond 1.5 percent if the county imposes a higher rate.

Charbonneau said setting specific requirements for how Lake County income tax revenue can be used will ensure items such as county jail improvements, 911 centers and infrastructure are priorities.

"The bill has always been focused on economic development and there's certain pieces of economic development that we feel are extremely important for Lake County," he said. "We just want to make sure that money is being focused on those particular economic development projects."

The House sponsor, state Rep. Ed Soliday, R-Valparaiso, said Lake County residents deserve to know their tax dollars are being spent wisely.

"It ensures a level of transparency that people in Northwest Indiana want," Soliday said.

The proposed compromise legislation also would lift the Lake County property tax levy freeze, regardless of whether the county council enacts an income tax. Eliminating the levy freeze would bring in about $4 million in additional annual revenue.

Currently, all local governments in the county can only collect property tax revenue equal to their 2007 totals due to a state law punishing Lake for being the sole Indiana county refusing to impose an income tax.

Charbonneau and Soliday said they are ready to sign off on the proposal and bring it to the full House and Senate for final votes.

The two Democrats on the conference committee, state Sen. Earline Rogers, D-Gary, and state Rep. Charlie Brown, D-Gary, said there's no way they can support the revised legislation.

"I don't understand why we want to tell the council how they should spend ... and especially getting that nitty-gritty down to one-quarter, one-quarter," Brown said. "The council has already said they prefer the current law of the 1 percent going to property tax relief, and they will add another half that they have the option to do, anyway."

Rogers said if Lake County is going to pass a tax, Lake County should decide how the money is spent -- not the Republican-controlled Legislature.

"The Indiana General Assembly continues to impose its wishes on Lake County, and I think it's a pattern that we need to break," Rogers said.

Both lawmakers also questioned why Lake County income tax revenue would be handed over to the RDA -- a state agency -- with no oversight. Typically in Indiana, only elected bodies decide how tax money is spent, they noted.

If Brown and Rogers refuse to sign off on the measure, they could be replaced on the conference committee by other lawmakers willing to submit the compromise to the full House and Senate.

Or the legislation could die.

That would also kill other pieces of the proposal that call for a new Gary airport board, the transfer of nearly $5 million in tax revenue from the Gary Sanitary District to the city of Gary, studies of the need for a trauma hospital and Lake Michigan port in Gary and a review of whether the Port of Indiana should pay Portage for municipal services.

Rogers said she hopes Charbonneau will draft a second conference committee proposal that removes all the Lake income tax and levy freeze provisions so the Gary economic development items can advance for a final vote.

Charbonneau can also concur with the House-approved version of the legislation, which contained the levy freeze thaw but not the directed income-tax spending, up until the Legislature adjourns for the year, possibly as soon as Friday.