HomeMy WebLinkAbout11-12-01 Residential Neighborhoods & Community & Economic Development Qommitt .port:
,Joint Muting of tit Varsiturntial Ittighborbootio tommittu anti tipz Qtommunitja
anti Commit I iit1opment tommitfrt
The November 12,2001 meeting of the joint meeting of the Residential Neighborhoods Committee
and the Community and Economic Development Committee was called to order by Residential
Neighborhoods Committee Chairperson, Council Member Karl King at 3:05 p.m. in the Council
Informal Meeting Room.
Persons in attendance included Council Members Aranowski, Pfeifer, Kelly, King, Varner,
Ujdak, Coleman, Kirsits and White;Mayor Stephen J. Luecke, Public Works Director Gary Gilot,
City Controller Frederick 011ett, Michael Danch, Richard Nussbaum, and Terry Bland of the
'o1111) 5:6010 tri 1.t1U,and Kathleen Cekanski-Farrand, Council Attorney.
Council Member King noted that the joint committee was called in order to hear a presentation from
Attorney Richard Nussbaum on the proposed "Indiana's 21st Century Tax Plan". He noted that it
is important that the Council know how the proposal would affect our residential properties as well
as its impact on economic development.
Mr. Nussbaum provided a handout on Indiana's 21st Century Tax Plan (copy attached) and noted
that this information can be accessed at the Lieutenant Governor's website. He noted that there has
not been a revamping of the tax procedures since the Doc Bowen days of almost thirty years ago.
The tax restructuring is resulting from a Supreme Court decision which emanated from Lake
County requiring a change of the assessment process to a fair market system. The Court ordered
that an assessment be conducted in 2001 effective 2003. Tax bills will be "drastically different",
and if nothing is done home owners will experience a 33 % increase with most urban areas
increasing higher than that amount. Mr. Nussbaum noted that the major sources for Indiana state
and local taxes for 2000 are:
28.7 % Property taxes
23.8 % Individual income taxes
23.3 % Sales taxes
Mr. Nussbaum noted that his home was built in 1926 and that he would experience an increase
greater than 33 % if nothing is done. He then reviewed the handout. He noted that the "Shelter
Allowance Rule" is currently being challenged in Court. It provides that the 1st$ 20,000(average)
would not be subject to a tax since it would not be considered "wealth" but rather a "subsistence
level".
Dr. Varner noted that the range is $ 16,000 to $ 22,700 and that a county average is then
developed.
Mr. Nussbaum noted that the charts reflect the ranges. He further noted that businesses have been
at a competitive disadvantage in light of the inventory tax. He then reviewed the gross corporate
income tax provisions.
The proposed "Indiana's 21st Century Tax Plan" would have as a basic principle that revenue is
neutral. The # 1 objective is to revise reliance on property taxes and the # 2 objective is to have
state/local economic development and tax fairness initiatives. Mr. Nussbaum noted that the two-
tier graduated income tax structure would be as follows:
Joint Meeting of the Residential Neighborhoods Committee and the Community &Economic Development Committee
November 12, 2001
Page 2
From To
3.4 % for income up to$ 90,000 3.9 % for incomes up to$ 90,000
3.4 % for incomes$90,000 &above 4.4 % for incomes$ 90,000&above
In response to a questwr n frac?Dr. Vat ItiVIr, D t M aimi anata-sl..that.tkr.pxtroarnirnn e,Q.w w l..'
into the tax relief fund and to the tuition support stabilization trust fund.
Mr. Nussbaum noted that the renter's deduction would be increased from $ 2,000 to $ 3,000; and
that the business franchise tax would range from $ 50 to $ 100,000 based on the net worth of the
business. He noted that twenty-one (21) other states have a business franchise tax.
Dr. Varner inquired whether the net worth would be for property located in Indiana for a business.
Mr. Nussbaum believed this was correct.
Mayor Luecke questioned what projections were utilized in light of the present status of the
economy. Mr. Nussbaum stated that he did not know the assumptions but would find that
information out from Tom Varga.
Council Member Coleman inquired about the shelter allowance lawsuit. Mr. Nussbaum stated that
the Apartment Owners Association filed a lawsuit about a week ago challenging the fairness of
putting the burden of taxation to multi-family living units.
Council Member Coleman stated that in his conversations with Tom Varga that he believes that the
lawsuit is not a frivolous one. Mr. Nussbaum stated that the Governor believes that they can
successfully defend their program.
Council Member Coleman inquired as to what "PTRC" stands for on page 9 of the handout. Mr.
Nussbaum noted that it stands for"property tax replacement credits".
Mayor Luecke noted that the city receives approximately 8 % under the old Bowen plan. The
Mayor further noted that TIF areas would need to be assisted and he was glad to hear that that is
under consideration. He noted the city's commitment to Bosch,and Crowe Chizek as examples.
Mr. Nussbaum noted that current outstanding bonds must be protected and he encouraged the
committee to have their voices heard by the state legislature.
Mayor Luecke stated that the elimination of the inventory tax is good but he has concerns about the
Urban Enterprise Zones since it depends on it. He noted that the UEZ ceases in two(2) years and
this might be incentive for it not to be renewed.
Council President Pfeifer inquired how the $ 20,000 subsistence threshold was developed. Mr.
Nussbaum stated that it is based on HUD measurements of efficiency and is dependent upon
market conditions in each county. Council President Pfeifer noted that most people do not live on
investment income since most incomes go into their homes. She suggested that a $ 30,000 to $
35,000 level should be utilized.
Mr. Nussbaum stated that this rule was developed by the State Tax Board. He noted that there are
Joint Meeting of the Residential Neighborhoods Committee and the Community&Economic Development Committee
November 12, 2001
Page 3
both legislative and constitutional concerns. He stated that he would get more information on this
topic and share it with the committees.
Council Member Coleman suggested that there should be a more comprehensive look at this
proposal in an "unbundled fashion", noting that most people will focus on their own individual
properties and tax implications. He noted that the Council's constituencies may infer that the utility
companies are the great beneficiaries of the new plan, even though they have carried a
disproportionate share in the past.
Mr. Nussbaum stated that as assessments are made they would be able to calculate various
alternatives.
Council Member King stated that the plan being discussed appears to be developed for "big
business" to understand, and that another plan needs to be developed so that the residential owners
can understand the proposal.
Mayor Luecke stated that he has asked the new Controller Frederick"Rick"011ett to begin working
on developing a model so that many variables can be tracked and then explained at public forums.
Council Member Coleman voiced concern noting that he does not believe the city should be the
messenger since we are not the author of the plan. Council Member Coleman stressed that the state
is responsible to get the model out to the communities throughout the state.
Mayor Luecke stated that he believes that the city should get the message out.
Dr. Varner noted that most persons know what the fair market value is of their homes and if
information could be developed which would assist homeowners in knowing what percentage
would apply and what the taxes would be, that that type of information would be useful.
Mr. Nussbaum asked the Council Members to call him if they had questions or suggestions, and
encouraged the legislative body to contact their state representatives and senators to take action this
legislative session.
Council Member King inquired as to what steps would be taking place next.
Mr. Nussbaum stated that legislation is being drafted now, and that the organizational day of the
house and senate will take place later this month.
Mayor Luecke stated that he would be going down to Indianapolis every other week when the
legislature is in session and will continue to work with IACT and the Metro Mayors. He noted that
old age and veterans exemptions are to be continued; however we need to look at the impact on
COIT and the 8%homestead credit.
Council President Pfeifer suggested setting up a date now for a follow-up meeting in December.
Council Member Kelly stated that we should start spreading the word.
Mr. Nussbaum requested copies of any models developed by the City.
Joint Meeting of the Residential Neighborhoods Committee and the Community&Economic Development Committee
November 12, 2001
Page 4
Council Member Varner voiced concern over having assessments on new homes going down
while the assessments of older homes would go up, and the ramifications which would result from
such a program.
Council Member King thanked Mr. Nussbaum for his presentation.
There being no further business to come before the Joint Committee meeting, Council Member
King adjourned the meeting at 3:55 p.m.
Respectfully submitted,
Council Member Karl King, Chairperson
Residential Neighborhoods Committee
Council Member Roland Kelly, Chairperson
Community and Economic Development Committee
KCF:kmf
Attae,kmient