The Brown County Council has voted to “thaw” a property tax levy freeze that has been in effect for the past five years as the council prepares to hear budget requests for 2020 next month.
The “thaw” was approved the same evening the council approved moving $56,000 from the general fund surplus and $307,344 from the rainy day fund to cover additional expenses in the coroner, juvenile probation, ambulance contract and health trust fund budget lines.
The rainy day transfers brought the fund’s balance below $1 million. It acts as the county’s savings account.
The property tax levy is the amount of money a government can raise through property taxes. The tax rate is how much each taxpayer pays per each $100 of assessed property value.
Council President Dave Redding said the thaw was brought about after the Department of Local Government Finance reached out to the county saying there would be a $208,000 shortfall in the budget this year.
A thaw allows the county to keep income tax at the level where it is and go back to funding the budget through property taxes, explained Jason Semler, the county’s financial consultant, at a public workshop about taxes last fall.
The DLGF predicted that the shortfall next year would be $500,000.
Brown County is one of three counties in the state that had this freeze in effect.
The thaw
Brown County can raise its income tax rate by about a half-percent more before it hits its maximum.
Since 2014, the council has been relying more heavily on income taxes to fund the county’s work and essential services, choosing to keep property taxes among the lowest in the state. That year, council members voted to freeze property taxes at the rate they were charging taxpayers at the time. That decision affected all taxing units in the county except for Brown County Schools.
Still, each year, the council has to decide whether or not it’s going to raise taxes by the percentage the state allows, called the “growth quotient.” Because Brown County is a “freeze” county, that growth, when the council has voted to use it, has been coming from income taxes instead of property taxes. If Brown County wasn’t a freeze county, that growth could come from property taxes, to the extent it is allowed by the state’s tax caps.
The freeze moved the county to the bottom five property tax rates statewide and in the top 10 income tax rates, Redding said.
“We’re not raising property taxes tonight. It is likely that thawing the property tax, you may see it going forward. But tonight is just thawing this tax,” he said before a vote was taken.
Redding said the thaw will give the council a “degree of freedom” as they move forward in preparing the county’s budget for 2020.
“Because, we have basically two choices next month: Raise income taxes if we need more funds or lay off people,” he said.
Comparing the maximum levies to maximum posted speed limits, Redding said the county’s has been “flatlined” since 2014.
But property tax bills can continue to go up in the county due to assessed value.
The amount of property tax due on each property is based on two key factors: the property’s assessed value, or AV, which is determined by the county assessor, and the property tax levy, which is determined by the state.
The DLGF looks at the tax base and the AV of all properties in the county to determine the tax levies and rates for each unit of government.
As the assessed value falls, the share of property taxes that everyone has to pay to fund the budget generally goes up, Semler explained last fall.
This thaw will affect all taxing units, like townships and the library.
“My opinion is we need this degree of freedom going forward especially in light of the shortfalls that Fred (Van Dorp with DLGF) predicted and on top of the additional expenditures we’re seeing here against us (tonight),” Redding said.
Commissioner Diana Biddle said that this was the first time the DLGF had called the county to inform them of the shortfall. “It’s (the thaw) really their recommendation. That was particularly interesting to me, that we actually heard from them in proactive way,” she said.
“Basically, they said we’ve been losing a couple hundred thousand dollars a year because we’ve been frozen.”
This is due to the county not using the growth quotient for property taxes.
When the council votes to leave the rate where it is, it is making a decision to take in less revenue than it could to run the government.
“We haven’t lost it, but we did not take the ability to use it like we could have,” Biddle said about the growth quotient.
Redding said the council would not see any additional money from it until 2021 when the assessment goes through.
As of Jan. 1, the current income tax rate is 0.025, according to the Indiana Department of Revenue.
For 2018 tax rates payable in 2019, property tax rates ranged from 1.536 to 1.232 depending on which township, conservancy district or municipality you live in.
Where are cuts?
Resident Tim Clark encouraged to look at what Brown County Schools has done when it has been faced with less revenue to run its operations.
BCS has been educating fewer students nearly every year since 2008. The district receives financial support from the state for each student, and it goes into the fund which pays the salaries of teachers and staff, among other expenses.
Superintendent Laura Hammack has been working with financial consultants to make spending choices, and, more than once, cuts. “Yet, she maintains quality and improves it, and takes advantage of any kind of opportunity she can to improve quality,” he said. “Look at the schools. Look at how they’re managing with less revenue and the cuts they’ve been making and how they’ve been managing their debt.”
In two school years, Brown County Schools has cut its budget by $2.3 million without issuing reduction-in-force notices to employees. More cuts will be needed as fewer students are predicted to attend school here.
Yet, the district has landed grants to improve programming and experiences for students, including a $500,000 Ready Schools grant from the Regional Opportunities Initiative Inc.
At the same time, the school district has put its health insurance fund right-side-up, going from a negative balance of $650,000 to a positive balance of more than $1.2 million. A new health insurance benefit adviser changed the district’s self-insurance plan, including providing a health clinic in Brown County that is free to all employees through their insurance plans.
“They are doing more with less, and that’s something the council needs to look at. If we don’t grow, then what? Where do we go?” Clark asked.
He encouraged the county to do an analysis of how many employees are working and how many are needed or not needed to complete necessary work.
“We’re going to have to look at the possibility of what do we cut and where? We never had to look at that before because we could always rely on passing that tax increase. You’ve got to get out of that mindset. If that’s only thing you can do, fine, but I want to see if we have even looked at what we can cut and where’s the fat?”
Redding said that Van Dorp had projected thawing the tax levy will make up the gap he saw.
Clark said the county needs to create a listing of future expenses, like a possible justice center, and “how fast you’re going to have to raise that property tax.”
“Every year we’re reactive. We’re firefighting. Just like this — here’s a surprise bill and here’s a surprise bill,” he said.
“That capital improvement plan budget is a big deal. That’s your hidden cost. That’s a big deal. What is that? What does it look like?” he said. “I would like to see where are our funded and unfunded requirements are on the infrastructure.”
He also encouraged the council to write a column in The Democrat, similar to Hammack’s Superintendent’s Corner, to inform the public on the current financial state of the county and what’s being done to address any issues there.
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In one meeting, the Brown County Council approved moving more than $350,000 into budgets where it had not been planned to be spent.
Some of the transfers were out of the rainy day fund, which is like the county’s savings account. This brought the fund’s balance below $1 million.
“I never wanted to see that happen, but it happens,” council Vice President Dave Critser said.
COURT
A busy Brown Circuit Court has resulted in the council moving more than $30,000 to the court and the county’s public defender fund.
The court requested $1,500 from a personnel line to go to a services line.
The council also approved moving $30,000 from the general fund to the public defender fund to help cover contracted services from a recent jury trial. An attorney had a conflict and a replacement had to be hired.
CORONER
The council moved $6,000 from the general fund to cover coroner’s autopsy fees. It was the first time Coroner Earl Piper had to request an additional appropriation for that line in 20-plus years.
Piper said he has had 30 death cases so far this year, and that the state dictates when he has to do an autopsy or toxicology reports, especially with the recent opioid epidemic.
Piper received $6,500 in that budget line at the beginning of the year.
“I doubt seriously the last half (of the year) will be too much different than first half. I need to be prepared just in case,” he said.
JUVENILE DETENTION
The council approved moving $50,000 from the general fund surplus to the secure detention placement budget for juveniles, which is in the commissioners’ budget.
It costs between $140 and $170 a day to house a juvenile depending on where they are being held. The cost increases to between $400 and $600 a day if the child has a psychiatric issue. County commissioner Diana Biddle said several are “long-term admissions.”
That budget line held $40,000 for the year. “This is just a bad year,” Biddle said.
She could not elaborate on the reason why there has been an increase, because juveniles are involved.
“What I know is the two most recent people that have been sentenced and what that projected cost is, I think it’s probably going to take every bit of that,” Biddle said.
Critser said that if the Department of Local Government Finance says the county doesn’t have the funds to cover moving the $50,000, then Auditor Julia Reeves can take it out of the county’s rainy day fund.
AMBULANCE
The council also approved moving $107,344 from the rainy day fund to cover the remaining bill from the ambulance contract.
The total bill for ambulance service with Columbus Regional Hospital in 2018 was $547,540. Biddle said she paid CRH $440,196. On July 15, the council was asked to approve transferring $107,344 to pay the remainder.
HEALTH INSURANCE
Another $200,000 was moved from the rainy day fund to the county’s health trust fund.
“Let me just say this is not being generated from just one case. We have three or four individuals who have hit our reinsurance,” Biddle said.
She added that there should not be much more money needed in this fund this year as the insurance company is expected to pay anything remaining. But she said “it could get uglier.”
Resident Sherrie Mitchell encouraged the council to look at its health insurance plan because it is “not sustainable.”
“I think we’re going to be forced to look at it,” council President Dave Redding said.
CLERK
Brown County Clerk Kathy Smith also approached the council on July 15 to have an additional $8,000 moved from the general fund to her department’s meeting and training budget. Smith said the money is needed to cover the cost of training a new clerk, deputy clerk and employees.
Redding said the council would look in Smith’s budget to see if money is already there to transfer into that line rather than from the general fund. The potential transfer will be addressed at the next council meeting.
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