2016 Continuing Disclosure - City of South Bend

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(Cont'd) The LIT Statute states that the pledge of a unit's distributive share of revenues ("LIT Revenues") generated as one of the former county income taxes to the payment of debt service on bonds shall be treated as a pledge of the related tax authorized under the LIT Statute and is binding and enforceable and remains in full force and effect as long as the debt service on any bonds remains unpaid. Those rights, duties, obligations, proceedings, or liabilities continue and will be imposed and enforced as if the LIT Statute had not been enacted and the statutes authorizing the former county income taxes had not been repealed. If there are bonds or leases outstanding that are payable from a former county income taxes, the adopting body may not reduce the tax below a rate that would produce one and twenty-five hundredths (1.25) times the total of the highest annual outstanding debt service plus the highest annual lease rental payments plus any amount required to be deposited in a sinking fund or reserve ("Coverage Requirement") unless the adopting body, or a city, town or county pledges all or a part of its share of certain available LIT Revenues for the life of the bonds or the term of the lease, in an amount that is sufficient that when combined with the amount pledged by the city, town or county that issued the bonds, to produce the Coverage Requirement. All income tax revenues imposed under the former county income taxes have been categorized by the DLGF into the appropriate rate or rates to provide revenue for all the same purposes for which revenue under a former county income tax was used in 2016. The LIT Statute combines the previous income taxes into a single income tax with three components which are a (a) special purpose rate (rate established by special legislation to fund special projects); (b) property tax relief rate (max rate 1.25%); and (c) expenditure rate (max rate 2.50% except Marion Co. - 2.75%)("Expenditure Rate"). Distributions under the Expenditure Rate must be categorized and are allocated into one or a combination of (a) certified shares (which may be used for any purposes of the civil taxing unit)("Certified Shares"); (b) public safety; and (c) economic development (may be used for same purposes as EDIT). The LIT Statute provides that the adopting body must, before July 1 of each year, allocate revenues from the Expenditure Rate to either: (i) public safety purposes; (ii) economic developmentpurposes; or (iii) certified shares, and provides that the allocation must be based on percentages among the civil taxing units in the county. The ordinance first applies in the following year adoption and then thereafter until it is rescinded or modified. For a county in which COIT was imposed, the adopting body is the local income tax council, which is structured in the same way as the COIT Council under the statute authorizing this former county income tax. LIT Revenues are received monthly from the county auditor. LIT Revenues, which are for economic development and have been generated by the former county income tax known as EDIT, have been categorized as economic development revenue of the expenditure rate. LIT Revenues for economic development are also received monthly from the county auditor. The adopting body may not reduce the proportional allocation among these uses if the reduction would allocate less to the payment of bonds or leases for which the Expenditure Rate has been pledged in accordance with law than the amount pledged and payable in that year or required under the agreements for the bonds or leases to be deposited in a sinking fund or other reserve in that year. If no portion of the Expenditure Rate is actually pledged to bonds or leases, the adopting body is not restricted in the allocation of additional revenue among the three purposes for the Expenditure Rate from year to year. Special legislation passed by the General Assembly for a specific county to enable the county to levy an income tax for a specific purpose at a specified special rate is also consolidated under the LIT Statute. The LIT Statute allows for a county to continue to levy the tax at the same rate to be used for the same purpose as under the applicable statute authorizing this former income tax. LIT Revenues are collected by the Indiana Department of State Revenue ("DOR"). Annually before August 2, the State of Indiana Budget Agency ("Budget Agency") provides the DLGF and the county auditor with an estimate of the LIT Revenues which are based on the actual income tax returns filed and processed from July 1 of the prior year through June 30 of the current year, adjusted for any refunds. Not later than fifteen days after receiving an estimate of the certified distribution, the DLGF shall determine for each taxing unit and notify the county auditor of the estimated amount of property tax credits, school distributions, public safety revenue, economic development revenue, certified shares, and special purpose revenue that will be distributed to the taxing unit, and the county auditor has thirty days after receiving the DLGF's estimate to notify each taxing unit of its estimated amount. Before of October 1 of each year, the Budget Agency shall certify to the county auditor and the DLGF the amount of the county's certified distribution. Not later than 15 days from receipt of the Budget Agency's certified distribution for the DLGF shall notify the county auditor of the certified amount of property tax credits, school distributions, public safety revenue, economic development revenue, certified shares and special purpose revenue that will be distributed to each taxing unit which receives LIT Revenues. CITY OF SOUTH BEND FOOTNOTES (Continued on next page) 18