Reducing property taxes by adding an income tax may be the solution sought by the Putnam County Council to combat ever-rising tax bills.
A presentation by Chris Mann, president of the Putnam County Farm Bureau, and Katrina Hall of Indiana Farm Bureau spoke Tuesday about how a new local option income tax, along with a county board of tax review, can take some of the property tax burden off farmers and homeowners while drawing revenue from everyone who has a job in Putnam County.
Farm Bureau has long been working on property tax reform, said Mann, whose family has a major agriculture operation in the Cloverdale area.
The state's method of taxation to fund schools, libraries and child welfare have been inequitable to farmers in particular, he said. But the recent legislative session saw House Enrolled Act 1478 allow a new Local Option Income Tax, along with a County Board of Tax and Capital Project Review to be established by counties.
"We would like to see reform," Mann told county council members Mitch Proctor, Keith Berry, Larry Parker, Darrel Thomas, Jay Fogle, Roger Deck and Don Walton. "They gave counties some options they haven't had before -- a way to reduce dependence on an antiquated property tax system."
Hall presented information that showed the 2006 net tax bills in the state exceeded $5.66 billion. That is an increase of $460 million in just two years.
For Putnam County, which collected $36 million in property taxes in 2006, a freeze of state tax credits means that the county was responsible for collecting $25 million from local taxpayers.
True to its name, the LOIC has different options counties can adopt.
The first is a levy growth replacement. This freezes usual property tax levy increases, but sets a local income tax of around three-tenths of a percent to make up the difference of any new tax levy increase. The new tax revenue is collected from a broader group -- income earners.
The second option is a dollar for dollar replacement by adding a .05 percent to 1 percent income tax that could raise up to $5.4 million for the county. This option can offset property tax replacement credit, homestead credit or credit on all residential property.
The third option requires that both the first and second options are adopted, and allows up to a .25 percent income tax that can be used for almost anything deemed "public safety," such as jails, courts and other improvements. Many counties struggle to find money to operate their criminal justice systems, Hall said.
Hall said her organization supports option three.
"This is a way for the county to free up money used on public safety to spend it on other things," she said.
It operates in a way similar to the County Adjusted Gross Income Tax, which must be shared with all cities and towns in the county, so it helps all communities by offsetting their rising property taxes.
It is estimated the county would gain around $1.3 million for use on anything deemed "public safety."
"These things are all just options," Hall told the county council. "Obviously our members wouldn't be here if they didn't want you to diversify your revenue stream. One of my observations is the sooner that the counties take advantage of income taxes, they reap the benefit of those taxes sooner."
Farmland values will increase by 29 percent next year, she said, so the farmers will have an increase in their taxes. The council would provide a 20 percent reduction in tax rate for all taxpayers by offsetting taxes.
However, council members noted that the LOIC will not affect the taxing abilities of schools.
In Putnam County, schools make up around 87 percent of the property tax bills.
So immediate relief from paying high taxes for schools will not come with this plan. It will only help in years to come by keeping the tax levies frozen for county government and making up that revenue elsewhere.
Over time, Hall said, it will be a benefit to all property taxpayers.
Bill Dory of the Greencastle/ Putnam County Economic Develop-ment office pointed out that the LOIC does not control the spending of schools.
"You have seen that county government spending is a lot less than schools," he told the council.
Hall said there is a way to gain control of that school spending, however, through the new County Board of Tax and Capital Project Review.
It will go into effect in 2009 to replace the tax adjustment board. This nine-member board will have the thumbs up or thumbs down for all construction projects in the county. Any project more than $7 million is automatically reviewed, and if the local board feels that taxpayers cannot afford the project, the board can deny it.
Another benefit, she said, is that all agencies will be required to do a capital projects plan, which the schools and libraries have been doing for years. This will allow the board to see down the pipeline to projects that are developing.
Council member Parker asked Hall if the board will be set in concrete, "because that is part of the problem. Locally we adopt something, but then the state changes the rules."
Changes, Hall agreed, are part of what the state does.
If the county council decides to go with the LOIC, it has until Oct. 1 to adopt the local ordinance.
The council agreed to look into the tax, with discussion and possible action planned for its August and September meetings.
The council noted that with budget hearings planned for late August and adoption of county budgets set for early September, they will get a good idea of where revenue stands and what funds are needed.
It also gives time for public input on the new income tax.
Council member Deck pointed out again that the new tax would be for county budgets only and would have no bearing on school district taxes.
"If we tell the people we are going to lower your taxes by this percentage," Deck said, "we're going to look like we're just taking more of their money.
"If you look at your tax bills, you would find out how much your county government is costing you. And it's miniscule compared to the schools," he said.
The council set county budget hearings for 2008 to begin at 9 a.m. Tuesday, Aug. 21 and continue Wednesday, Aug. 22 in the courthouse annex.
* Heard from Byron Gough of the Solid and Water Conservation District that the agency is in need of assistance since rent has almost doubled since last year by more than $5,000. That issue will be presented to the council during budget time in August.
* Approved an additional appropriation request for $5,000 to cover pauper counsel and depositions for pauper defendants in the Putnam Superior Court. that account had $5,000 budgeted, but that amount has already been spent. Judge Robert Lowe told the council he thinks the additional $5,000 will carry the court through the end of the year.
* Heard from county Coroner Thomas Miller that several changes have gone into effect for coroners as of July 1. A deceased person must be identified by one of four means -- by DNA, fingerprints, dental records or a family member. He said he will be requesting a digital camera, so that photos for confidential identifications can be made. The council suggested Miller seek funding through the Prosecutor's Office via the seized assets account.
* Granted tentative approved $120,000 in additional funding for Bridge 114 on County Road 500 West in Madison Township. The item will be legally advertised for official approval in August.
* Approved resolutions affirming tax abatements for Buzzi Unicem (first granted in 1998), Cook Lumber (first granted in 1998), Dixie Properties (granted in 1998 and 2003) Magic Circle (granted in 2003 and 2005).
* Granted formal approval of an additional appropriation of $443,000 for the Emergency Operations Center construction project.
The county council regularly meets at 6:30 p.m. on the third Tuesday of each month at the courthouse annex. Meetings are open to the public.