2005 Performance Based Budget - Laserfiche WebLink

Home Browse Search

For future years, 2006 and 2007, the City has been informed to use a property tax increase of 3.8% and 3.4% respectively. Although 2003 actual collections of the total tax levy hit over 100%, prior years' past due amounts collected during 2003 made up the significant amount of the shortfall as is reflected in the above amounts collected. As a result, the tax levy is a reliable number to use when estimating the City's anticipated property tax revenue. As more fully discussed below, the City's Common Council has recently passed ordinances that established two new local option income taxes. These local option income taxes will eventually generate enough funds to reduce the heavy reliance the City currently needs to place on. property taxes to fund a majority of the services provided by the City. Approximately 76% and 71 % of the General Fund and Park Department revenue, respectively, are funded by property taxes. It is anticipated that it will take several years before these newly enacted taxes will be at a level that will make it possible to reduce the need to increase the City's total tax levy up to the maximum 5% each year. In the meantime, the City continues to search for other sources of revenue to reduce its reliance on property taxes. As mentioned above, the City currently has available a major new source of revenue in the form of the County Option Income Tax (which was enacted effective July 1, 1997) and the Economic Development Income Tax {enacted effective July 1, 1995 and increased effective July 1, 1997}. These two relatively new countywide taxes have allowed the City to shift a portion of its capital expenditure funding from the General Fund to these two Capital Funds. The County Option Income Tax rate was phased in over afour-year period, increasing from two tenths of a percent {0.2%} of adjusted gross income to its current rate of six tenths of a percent (0.6%}, and, when combined with the Economic Development Income Tax, the total tax is eight tenths of one percent (0.8%) of the county taxpayers' adjusted gross income. The maximum combined rate for these two income taxes could be 1 % of adjusted gross income if the Economic Development Income Tax was raised to its limit {0.4%} by the County Income Tax Council. Both of the local option income taxes are collected and administered by the Indiana Department of State Revenue. This department is required to estimate by July 1 of each year the amount of revenue to be received by the County during the following year. This estimate is referred to as the "ceriif ed distribution" and it becomes an amount that the County can be guaranteed to receive. The County then allocates these receipts based upon property tax levies as described below. This allocated certified amount is the amount budgeted by the City for both taxes. These two option income taxes have generated and are projected to generate the fallowing annual revenue streams as a direct result of increasing tax rates (no income growth rate has been factored into these projections): • Economic Development Income Tax (EDIT}: Actual receipts for 200I, 2002, 2003 and 2004 were $3,417,763, $5,462,867, $3,689,202 and $3,448,688 respectively. The 2005 Budget projects receipts to be $3,582,215 and this is the anticipated level to be collected each year, assuming the current rate of two tenths of one percent and no growth rate. The 2002 receipts included a one time distribution of $1,506,173. This increase from the State is a "catch-up" from prior year conservative estimates. This tax is allocated between the County and the cities and towns in the County based on the proportionate amounts of property tax levy far each unit. The budgeted 2005 City's portion is 37.9%. Any future change in the actual annual amount of adjusted gross income reported by county taxpayers would have a direct impact on the amount of EDIT taxes collected. Another possible impact on the amount of EDIT funds received in the future would be a result of an EDIT rate change if approved by the County Income Tax Council. B-5