The Brown County Council will need to decide if it’s going to raise the income tax rate or cut budget requests for 2019.
Brown County is a “freeze” county, Auditor Beth Mulry explained at the June county council meeting.
Every year, the Indiana Department of Local Government Finance allows counties to increase their tax levy based on statewide income estimates. However, since the Brown County Council voted to freeze the property tax levy starting in 2014, any growth in revenue that’s not related to creating new government units or incurring debt has to come from income tax.
The state assumes that counties will grow their tax rates every year, Mulry told the council. So the tax revenue projections the state will send out to counties, showing what money they likely will have to work with, will be based on the assumption that the tax levy is growing, she said. If the county council isn’t going to raise income taxes, it needs to be aware that its revenue projections from the state aren’t going to be accurate, and cut budget requests back accordingly, she said.
The county council didn’t vote about raising income taxes or not at the June meeting. Last week, Mulry didn’t have estimates yet on how much of an increase that could be or how much money it could bring in for local government.
“I don’t like the term ‘grow the tax rate’; I’d rather grow the economy in this county,” said council President Keith Baker.
At the June 18 county council meeting, the council did vote to pursue taking out a new $2 million bond, which is projected to raise property taxes by about 70 cents on a property with a gross assessed value of $100,000. That money is to pay for a list of improvements on county properties and road work. Even in a freeze county, certain types of property tax increases are allowed, Mulry said last week.
The county council hasn’t always chosen to increase income taxes when it could have, and the council hasn’t always been aware of the impact that decision has on the budget.
In 2015 and 2016, the council didn’t raise the income tax levy. That meant missing out on $266,332 in revenue that would have gone to non-school local taxing units, such as the townships, the Town of Nashville, the county library and solid waste districts, and county government, over those two years. County government would have received about $207,000 of it.
The county’s hired financial consultant at the time helped Mulry find that discrepancy when the county was preparing its budgets in 2016. Mulry had noticed that the county’s revenue for 2015 was lower than it should be, and they found that it was because the council didn’t vote to increase taxes to the amount they were able.
The council did raise income taxes by the maximum amount for 2017, but didn’t for 2018, Mulry said.
By Indiana law, under a levy freeze, the county can raise the tax rate, but can’t lower or rescind it without the permission of the Indiana Department of Local Government Finance.
The county has been able to float for the past year without the extra income tax revenue because of money that had been put aside in a “stabilization fund.” However, that fund will be depleted this year, and the county will see about a $40,000 budget shortfall overall, Mulry said.
If the council isn’t going to raise the income tax rate for 2019, she recommended county leaders try to cut as much as $250,000 from 2019 budget requests to be safe.
“Eventually, as the county grows, we will hit the maximum rate, and then the county will have to decide whether or not, ‘We’re frozen, we’re not moving anymore,’ or if we do what they call a ‘thaw’ and go back to property taxes,” Mulry said. “We all want to stabilize the property taxes and not grow them, and income taxes; I just want you guys to be aware.”
Baker said the projected $40,000 shortfall is one reason why the council probably won’t do a cost-of-living raise next year for county employees. Even a 1-percent raise would have cost the county about $35,000. Last year county workers received 3 percent, which cost about $100,000, he said.
The county council will set budgets for 2019 during a series of public meetings, on Aug. 20, 21 and 22 starting at 5 p.m. A public hearing on the county budget will take place on Sept. 17.
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Brown County residents don’t just pay taxes to support county government.
Depending on where they live, they might also pay taxes to a municipality (the Town of Nashville), a conservancy district (Lake Lemon or Cordry-Sweetwater) and/or a fire protection district (Hamblen Township).
All property owners in the county also pay taxes to a township trustee (Hamblen, Jackson, Washington and Van Buren) and to support Brown County Schools, the Brown County Solid Waste Management District and the Brown County Public Library.
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