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property taxpayers carry a disproportionate share of the cost of public safety (police & fire services)
<br />and general government functions (elected officials, a
<br />Leggl De artment and Administration and
<br />Finance Department), Approximately 71 % of the Genera 2005 total revenue was derived
<br />from property taxes. The public safety and general government functions constituted approximately
<br />91% of the General Funds 2005 total expenditures. South Bend, like many other cities, has public
<br />safety at the top of its priority list. In order to shift part of the financial burden for these services
<br />away from the City's homeowners /property owners, new sources of revenue need to be identified. In
<br />an 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 at
<br />the rate of one tenth of one percent (0.1 %) of City residents' (and some nonresidents')
<br />adjusted gross income, which generated $1,382,670 and $1,466,029 for the City of South
<br />Bend in 1996 and 1997, respectively. The City's Common Council and the St. Joseph
<br />County Council passed respective ordinances that increased the rate to two tenths of one
<br />percent (0.2%), which effectively doubled the City's distribution be inning in 1998. The
<br />i received $5,462,867, $3,689,202, $3,448,688 and $3,464,152 oDIT distributions in
<br />2002, 2003, 2004 and 2005 respectively, and is anticipating the receipt of $3.4 million from
<br />this tax in 2006. Both of the local option income taxes (EDIT and COIT) are collected and
<br />administered by the Indiana Department of State Revenue. The EDIT distribution is then
<br />remitted to the county, which then allocates these tax receipts between the county and the
<br />cities and towns in the county based on the proportionate amounts of property tax levy for
<br />each unit. The City's portion of the total county's EDIT ranged from 35.6% to 38.2% over
<br />the last four 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 City and County Councils enacted this tax effective
<br />July 1, 1997 at a rate of two tenths of one percent (0.2% ) with an increase of one tenth of one
<br />percent (0.1 %) er year during the next four years. In 2002 the rate was set to its legal limit
<br />of six tenths of one percent (0.6 %). The City would not have supported the new County
<br />Option Income Tax if it had not been accompanied by a tandem ordinance, which established
<br />an additional 6% homestead credit for property taxpayers. This additional homestead credit
<br />increased to 7% in 1999 and to 8% in 2000 (where it will remain at this level). Thus, as a
<br />result of the passage of this new tax, City propperty taxpayers were provided relief through a
<br />reduction in their property tax bills while the Cit was provided with an additional source of
<br />revenue that will eventually slow the growth of future roperry tax rate increases. The City
<br />received $9,531,190 in 2002, $8,015,302 in 2003, $7001,198 in 2004 and $5,695,618 in
<br />2005. The City is antici ating the receipt of $5.5 million from this tax in 2006. In 2002 a
<br />one -time adjustment of 2,318,375 for conservative distribution estimates in the early years
<br />of the tax was transferred. These countywide taxes are allocated (net of homestead credits)
<br />between all taxing units within the county based on the proportionate amounts of property
<br />tax levy for each taxing unit.
<br />As mentioned earlier, the City is always looking for other sources of revenue that would reduce its
<br />reliance on property taxes. A viable source of revenue is from user fees and /or charges for services
<br />currently being performed. It is the City's desire to establish all user charges and fees at a level
<br />closely related to the full cost of providing the services while taking into consideration similar
<br />charges /fees being levied by other public and private providers. The City recalculates, on an annual
<br />basis, the full costs of activities supported by user fees (including the Parks Department programs
<br />and EMS ambulance services among others) to identify the impact of inflation and other cost
<br />increases. It then revises user fees accordingly. As a result, overall charges for services and user fee
<br />revenues are anticipated to increase in line with annual operating and capital budgets.
<br />General Government Expenditures - The City breaks its general government expenditures into six
<br />categories: general government, public safety, highways and streets, health and welfare, culture and
<br />recreation, and economic development. Information is presented separately in the governmental fund
<br />balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund
<br />balances for the general, park funds, TIF Airport and COIT which are considered major funds. Data
<br />for the other funds are combined into a single, aggregated presentation. Individual fund data for each
<br />of these non -major governmental funds is provided in the form of combining statements elsewhere in
<br />this report.
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