Tax Increase Comes Before Council

Before the last council meeting I warned readers that a new ordinance being introduced would likely increase the property tax levy by retroactively changing the 2008 budget which has already been passed by the previous city council. Today, the JG fronts a detailed story confirming my original report:

One of Mayor Tom Henry’s first acts as mayor will be to ask the City Council to undo a $3.7 million tax cut, potentially forcing homeowners to pay higher bills this year.

The City Council next week is expected to discuss a proposal to increase the city’s tax levy from $99.4 million to $103.1 million for this year. The tax levy is the total amount of property taxes the city collects.

With Gov. Mitch Daniels’ plan to cut property taxes across the state, it was appropriate to reintroduce the issue to the council for discussion, city Controller Pat Roller said.

“We have new proposals being made that substantially impact the city of Fort Wayne,” she said.

Roller said the governor’s plan would cut the city’s budget by nearly $10 million a year starting in 2009. Combined with the council’s cut this could force the city to make some drastic decisions.

Now before everyone goes ballistic over this tax increase I want to remind readers that the original tax cut was fiscally irresponsible. The council didn't cut spending they cut money that was "earmarked" for paying down the police and fire pension debt. Here's what I wrote at the time:

I fully agree with the controller and I think the council went too far with their tax cut. I think the council did a great job cutting spending - to the tune of $1.3 Million - and I have no problem cutting that exact amount in taxes. But they went above and beyond that and their tax cut will be funded by money that was going to be used to pay down the mountainous amount of debt the city has accumulated. While citizens might be happy to see their tax bill go down even more than it would have, they need to remember that the council simply kicked the can down the road and those debts will have to be paid at some point.

But there's a broader issue here besides whether or not that tax cut was wise. The most prescient issue seems to be whether or not it is legal to retroactively change the budget and levy after it's been approved by the previous council. That's something the current council will have to figure out before even discussing the issue. But even if it is legal, is this the kind of precedent that council wants to set - that our council will retroactively raise taxes after plans and budgets for local businesses might've already been set?

And I want to add a little context that readers won't get from the JG story. I think the biggest reason the council was able to cut the money "earmarked" for the pension debt is because it was never really earmarked. What I mean by that is that the money was actually in the general fund and not a dedicated sinking fund as Mike Sylvester suggested it should be. So the controller can say the money was earmarked for the pension but the administration could essentially use it for anything they wanted - their own slush fund if you will.

With that context, if the council decides to raise the levy they should demand that those funds be placed into a dedicated fund for paying down our debt. The other part of this that bothers me is that the controller uses the governor's property tax changes (HB 1001) as the reason for needing to increase the levy. However, that bill hasn't even passed the state legislature, yet there's nothing in our city ordinance that ties our levy increase to the passage of HB 1001. In other words our taxes might go up even if we don't see a shortfall due to changes in state law.

Like I said before, this will be an interesting one to watch