2002 Comprehensive Annual Financial Report

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One of the major focuses for the City continues to be the need to diversify its revenue streams. This is necessary to reduce the dependancy on general pproperty taxes and to ensure that abroad- base of users, including nonresidents, share in the funding of basic city services. Currently the City's property taxpayers carry a disproportionate share of the cost of public safety (police & fire services) and general government functions (elected officials, Legal Department and Administration and Finance Department). Approximately 74% of the General Fund's 2002 total revenue was derived from property taxes. The public safety and general. government functions constituted approximately 82% of the General Fund's 2002 total expenditures. South Bend, like many other cities, has public safety at the top of its priority list. In order to .shift part of the financial burden for these services away from the City's homeowners/property owners, new sources of revenue need to be identified. In an attem t to accomplish this, two new taxes have been enacted since 1995 that have begun to shift this f nancial tax burden. Economic Development Income Tax (EDIT) -This tax was first enacted as of July 1, 1995 at the rate of one tenth of one percent (0.1 %) of City residents' (and some nonresidents') ad'usted gross income, which generated $1,382,670 and $1,466,029 for the City of Southend in 1996 and 1997, respectively. The City's Common Council and the St. Joseph County Council passed respective ordinances that increased the rate to two tenths of one percent (0.2%), which effectively doubled the City's distribution be inning in 1998. The City received $3,156,441, $3,105 473, and $5,462,867 ofg EDIT distributions in 2000, 2001, and 2002 respectively, anc~ is anticipating the receipt of $6.3 million from this tax in 2003. Both of the ocal option income taxes (EDIT and COIT are collected and administered by the Indiana Department of State Revenue. The EDIT distribution. is then remitted to the county, which then allocates these tax receipts between the county and the cities and towns in the county based on the proportionate amounts of property tax levy for each unit. The City's portion of the total county's EDIT ranged from 35.6° o to 38.2% over the last four years as the proportionate property tax levies have changed. The EDIT rate will remain at the current level (0.2%) unless further action is taken by the respective councils. The EDIT rate can legally be raised to four tenths of one percent (0.4 /o). County Option Income Tax (COIT) -The Ci and County Councils enacted this tax effective July 1, 1997 at a rate of two tenths o~ one percent (0.2%) with an increase of one tenth of one percent (0.1%) per year during the next four years. In 2002 the rate was set to its legal limit of six tenths of one percent (0.6% . The City would not have supported the new County Option Income Tax if it ha not been accompanied by a tandem ordinance which established an additional 6% homestead credit for ro ertrtyy taxpayers. This additional homestead credit increased to 7% in 1999 and to 8%pn 000 (where it will remain at this level). Thus, as a result of the passage of this new tax, Cittyy property taxpayers were provided relief through a reduction in their property tax bills while the City was provided with an additional source of revenue that will eventually slow the growth of future property tax rate increases. Although the rate was in effect in mid-1997, the City received its first COIT distribution of $740,235 in 1998. The receipts increased from $1,717,303 in 1999 to $2,378,487 in 2000 $4,491,922 in 2001 and 9,531,190 in 2002. The City is anticipating the receipt of $6.3 million from this tax in 2003. In 2002 aone-time adjustment of $2,318,375 for conservative distribution estimates in the early years of the tax was transferred. These countywide taxes are allocated (net of homestead credits) between all taxing units within the county based on the proportionate amounts of property tax levy for each taxing unit. As mentioned earlier, the City is always looking for other sources of revenue that would reduce its reliance on roperty taxes. A viable source of revenue is from user fees and/or charges for services curren~y being performed. It is the City's desire to establish all user charges and fees at a level closely related to the full cost of providing the, services while taking into consideration similar charges/fees being levied by other public and pnvate providers. The City recalculates, on an annual basis, the full costs of activities supported by user fees . including the Parks Department roggrrams and 1rM5 ambulance services among otners~ to iaennry the impact or inflation andpother cost increases. It then revises user fees accordingly. As a result, overall charges for services and user fee revenues are anticipated to increase in line with annual operating and capital budgets. 5