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Currently the City's property taxpayers carry a disproportionate share of the cost of public safety
<br />(police and fire services) and eneral government functions (elected officials, legal, code
<br />enforcement and administration/fmance). Approximately 73% of the General Fund's 2006 total
<br />revenue was derived from property taxes. Public safety accounts for approximately 72% of total
<br />2006 General Fund expenditures. Clearly, the Mayor and Conunon Council of South Bend have
<br />public safety at the top of their priority lists. In order to shift part of the financial burden for these
<br />services away from the City's homeowners, new sources of revenue need to be identified. In an
<br />attempt to accomplish this, two types of income taxes have been enacted to shift this financial tax
<br />burden.
<br />• Economic Development Income Tax (EDIT) -This tax was first enacted as of July 1=1995
<br />at the rate of one tenth of one percent (0.1 %l on the adjusted gross income of City residents
<br />(and some nonresident). EDIT generated $f,382,670 and $1,466 029 for the City of South
<br />Bend in 1996 and 1997, respecrively. The Common Council and fit. Joseph County Council
<br />passed respective ordinances that increased the rate to two tenths of one percent (0.2%)
<br />which effectively doubled the City's distribution beginning in 1998. The City received
<br />$5,462,867, $3,689,202, $3,448 6 8 and $3,464,152 of EDIT distributions in 2002, 2003,
<br />2004 and 2005, respectively, anc~received $4,013,475 from this tax in 2006. EDIT taxes are
<br />collected and administered by the Indiana Department of Revenue. The EDIT distribution is
<br />then remitted to St. Joseph County, which allocates these tax receipts between the county and
<br />the cities and towns in the co~ntybased on the proportionate amounts of pro~erty tax levy for
<br />each unit. The City's portion of the total county's EDIT ranged from 35.6 /o to 39.3% over
<br />the past 10 years as the proportionate property tax levies have changed. The EDIT rate will
<br />remain at the current level (0.2%) unless further action is taken by the respective councils.
<br />The EDIT rate can legally be raised to four tenths of one percent (0.4%).
<br />• County Option Income Tax (COIT) -The Common Council and St. Joseph County
<br />Council enacted this tax effective July 1, 1997 at a rate of two tenths of one percent (0.2%),
<br />with an increase of one tenth of one percent (0.1 %) per year duringg~the next four yeazs. n
<br />2002 the rate was set at its legal limit of six tenths of one percent (0.6%). The City would
<br />not have supported the riew County Option Income Tax if it had not bbeen accompamed by an
<br />accompanying ordinance which established an additional 6% homestead credit for prope~
<br />taxpayers. This additional homestead credit increased to 7% in 1999 and to 8% in 200
<br />(where it will remain at this level). Thus, as a result of the passage of this new tax, City
<br />property taxpayers, were provided relief through a reduction in their property tax bills while
<br />the City was provided with an additional source of revenue that will eventually slow the
<br />rowth of future property tax rate increases. The City received $9,458,584 (2002),
<br />8,015,301 (2003), $7,001,199 (2004), $5,490,218 (2005) and $6,410,405 (2006) from the
<br />County Option Income Tax. The City is anticipating the receipt of $5.7 million from this tax
<br />in 2007. In 2002 a one-time adjustment of $2,318,375 for conservative distribution
<br />estimates in the eaz~y years of the tax was transferred. These countywide taxes are allocated
<br />(net of homestead credits) between all taxing units within the county based on the
<br />proportionate amounts of property tax levy for each taxing unit. COIT taxes aze collected and
<br />administered by the Indiana Department of Revenue.
<br />As mentioned earlier, the City is looking for other sources of revenue that will reduce its reliance on
<br />pproperty taxes. A viable source of revenue is from user fees and/or charges for services currently
<br />bein performed. It is the City's desire to establish all user chazges and fees at a level closely related
<br />to the full cost of providing the services while taking into consideration similar charges/fees being
<br />levied by.other public and private providers. The City recalculates, on an annual basis, the full costs
<br />of activities supported by user fees (including Pazks and Recreation Department programs and EMS
<br />ambulance services) to identify the impact of inflation and other cost increases. It then revises user
<br />fees accordingly. ,As a result, overall charges for services and user fee revenues are anticipated to
<br />increase in line with annual operating and capital costs.
<br />General Government Expenditures -The City breaks.its general government expenditures into
<br />eight categories: general government, public safety, highways and streets, health and welfare,
<br />economic development, culture and recreation, debt service and capital outlay.
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