Wednesday, December 17, 2008


1. The total tax rate for the School City of Hammond is 2.1070, which ranks 11th in the state. This does not include the tax impact if the project had been approved.

2. There has been slow growth in the net assessed values in the School City of Hammond from 2003 to 2007. The 2003-pay-2004 certified net assessed value of property was $2.34 billion and the certified net assessed value in 2007-pay-2008 was $2.46 billion. For this reason, an increase in the tax levy if this project was approved would have a greater impact on the tax rate than if the net assessed value grew at a parallel rate to the gross assessed value over the same period of time (22.5 percent gross assessed valuation versus 5.22 percent net assessed valuation.)

3. The property tax impact of the project would be 61 cents per $100 of assessed value. Approval of this project would have doubled the circuit breaker impact in the school district in 2011. Additionally, the circuit breaker impact of this project on other taxing units would also have been significantly affected. Therefore, approval of the project would have significantly decreased the property tax revenue of other taxing units in Lake County that share a taxing district with the School City of Hammond.

4. The School Property Tax Control Board recommended denial of this project 6-3.

5. The enrollment patterns do not justify a project of this magnitude.

6. The debt service of the district ranks sixth highest in the state of .09561. This figure does not include the effect the approval of this project would have had.

From The Times 12/17/08

Tuesday, December 16, 2008


Newly appointed Department of Local Government Finance Commissioner Timothy Rushenberg gave Hammond taxpayers an early Christmas present.

Commissioner Rushenberg denied the School City of Hammond's $165 million project to build a new high school in Hammond. The project included building a new high school, closing Hammond High, and converting Gavit into strictly a middle school.

School city officials had said the project would have little impact on property tax bills. However, what they failed to mention was the financing would be backloaded. Practically no principal would be paid in the early years of the debt, with a huge increase occurring during the last ten years of the bond. Apparently, Commissioner Rushenberg saw through the smoke and mirrors and was not swayed.

In a news release Commissioner Rushenberg expressed concerns about the cost of the project and the impact it would have not only on Hammond taxpayers but other taxing units in Lake County that are under the circuit breaker. That impact was one of his primary reasons for nixing the project.

Superintendent Walter Watkins is not ready to give up on the project. School leaders and the school district's legal and bond consultants will review the project before deciding on their next course of action. They could scrap the project altogether. They could scale back the project, or they could continue to pursue the current building plan.

However, under the new property tax legislation, a referendum would now be required.


Timothy J. Rushenberg was appointed commissioner of the Department of Local Government Finance by Governor Mitch Daniels on December 15, 2008. Prior to that appointment, Tim had served as the DLGF General Counsel for the DLGF since August 2007. As the agency’s general counsel, he assisted in drafting legislation included in Daniels’ 2008 property tax package approved by the General Assembly earlier this year that has resulted in average homeowner property tax decreased of more than 30 percent. He is a certified Level Two assessor-appraiser in Indiana.

Before starting with the Department in 2007, Tim worked as an associate attorney with the law firm of Sanders Pianowski LLP in his native Elkhart, Indiana. Prior to working with Sanders Pianowski LLP, Tim served on active duty in the United States Air Force as a judge advocate where he was as a prosecutor and defense counsel in military courts-martial, civil law and legal assistance attorney, and contracts attorney with the Air Force Judge Advocate General's Corps. Tim was stationed at Davis–Monthan AFB in Tucson, Arizona and Minot AFB in Minot, North Dakota. He was awarded the Air Force Commendation Medal (first oak leaf cluster) and the Air Force Achievement Medal (first oak leaf cluster) for his active duty service. Prior to joining the Air Force Judge Advocate General's Corps, Tim worked as an attorney in the Office of Corporation Counsel for the City of Elkhart.

Tim received his Bachelor of Arts in Political Science from Indiana-University-South Bend and graduated with his law degree from Valparaiso University School of Law. Tim is licensed to practice law in Indiana (active) and Washington, D.C. (inactive). Tim has published numerous articles on several issues, including HIPAA and international law.

From DLGF website, http://www.in.gov/dlgf/

Monday, December 15, 2008


When the 2009 General Assembly convenes in January, legislators will begin crafting the next 2 year budget for the state of Indiana.

However, lawmakers received a revenue forecast on Thursday that will give them $800 million less to spend from the current $26.4 billion plan. They must also cut $763 million to keep the current budget in balance with tax collections.

"We will adjust spending to preserve a balanced budget in Indiana," Governor Mitch Daniels said during a Statehouse news conference. "These are only the first and hardly the last of the hard decisions that we will have to make."

The state is expected to take in $488.6 million less in revenues for the fiscal year that ends in June and overall, $935 million less than what was anticipated when the current budget was drafted in 2007.

Governor Daniels has already ordered state agencies to cut their budgets by 3 percent and no annual pay raises for state employees, including himself and legislators.

Currently, Indiana has about $1.4 billion in its rainy day fund and is only one of a handful of states that is not in the red. However, Daniels has already told legislators he does not want them to tap into the fund. He is concerned the $1.4 billion will be needed later on if the economic downturn worsens or lasts longer than is predicted. The recession is expected to last through mid-2009, but Indiana's unemployment rate will not peak until early 2010.

We may not always agree with Governor Daniels, but we do agree with him on this issue.

Until the economy improves, make do with what you have and put all non-essential spending on hold.

It's too bad some of our local elected officials can't follow Daniels' lead on being fiscally prudent.


Hammond City Controller Barbara Cardwell won't be enjoying her retirement any time soon. The Board of Public Works and Safety has awarded Cardwell a consulting contract to provide financial services to the city beginning January 1, 2009.

Cardwell will be paid a fee of $90 an hour to be capped at $40,000. The contract runs through 2009. Did Cardwell make $90 an hour when she was Hammond City Controller?

Cardwell will assist the city with such financial issues as tax increment financing, sales tax increment financing and related bond issues. She will also assist Robert Lendi, the incoming City Controller.

Lendi, who left his position as economic development director, will become City Controller in January and has been working full time in the Controller's office since October 1. Lendi will become one of the city's highest paid administrators in January. He will make a base salary of $63,352. In addition, he will be paid $6,109 from the Water Department and $5,516 from the Sanitary District.

Apparently, the City of Hammond is not aware that the country is in a major economic downturn.

Blunt Proof of the Feasibility to Permanently Abolish Property Tax

Media Contacts:
Melyssa Donaghy 317-938-8913
Max Katz 765-409-6669

Hoosiers For Fair Taxation, Senator Delph, Representative Noe, Representative Elrod and many other legislators along with Stop Indiana, attorney John Price, Eric Miller's Advance America, and the Statewide Taxpayer Alliance know that property tax abolishment, without substantial increases in sales tax and income tax, is realistic and possible. The economist Dr. Bill Styring's 2/2/2 Plan demonstrates that the state of Indiana can completely replace property tax without changing the state's current spending habits.

Dr. Styring's plan does not account for positive changes in Indiana's economy that will undoubtedly follow the elimination of property tax such as heavy real estate investment and increased consumer spending due to increased statewide disposable income. The real estate investment in Indiana alone would cause such an economic boom that it could likely end our abandoned property and foreclosure crisis. Property tax elimination would also likely cause a surge in Indiana's population as more people locate to Indiana to take advantage of real estate purchase opportunities without the burden of property tax. With the population surge would come more sales and income taxes.

The General Assembly does not have to adopt a specific plan until the year 2011. In the meantime, we recommend that the General Assembly approves the 27steps outlined in the report prepared by the Sheperd Kernan commission. While the Governor's commission cannot forecast the savings to the state once the plan is implemented, there is no doubt that the savings would be substantial--perhaps equivalent to the the entire property tax burden currently placed on Indiana's homeowners because our legislators have not had the political will to liberate Indiana's governing structure and her taxpayers from the 19th century.

Our citizen networks will work to replace all legislators who do not support property tax repeal in the November 2008 election.

The 2/2/2 Plan, to replace property taxes in Indiana based upon the latest revenue forecast (07/08 fiscal, estimate):

1) Current IN sales tax (state level rate of 6%): $5.601 billion2% increase would yield an additional $1.867 billion

2) Current corporate profits tax: ~$2 billion

2% increase would yield an additional $.286 billion ($286M)

3) A 2% statewide average of the COIT would yield $2.705 billion to cover local civil units of gov.

By adding these three together ($1.867 billion + $.286 billion + $2.705 billion), a total of $4.858 billion is realized; enough revenue to replace property taxes.

Indiana has a 70-plus year history of attempts to lower property taxes by raising other, non-property taxes. In every case these have failed miserably. The new taxes, or higher rates on old taxes, remain in place. And, in short order, property taxes rise back to their old levels, poised to roar even higher.

--1933. General Assembly imposes two new taxes: an individual gross income tax and a corporate gross income tax. The morgue of the Indianapolis Star indicates that the political leadership at the time said this was for property tax relief (1933 was the pits of the Great Depression, and people were losing their homes. Home prices declined by over 40% in the 1929-1933 period). Property tax relief was nonexistent. The state used the money to bail out the state's own finances.

--1963. General Assembly imposes a new sales tax at a rate of 2% and changes the 1933 individual gross income tax (from 1933) to an adjusted gross income tax (the one we have now) at a rate of 2%. Again, the ostensible reason was for property tax relief and again little PTR was forthcoming.

--1967. Those 1963 tax changes were raising more money than projected. The GA decides to give back 8% of sales and income tax revenue to local government for property tax relief. Local units spent the money. No PTR.

--1973. Gov. Otis Bowen launches the most determined PTR offensive yet. The sales tax goes to 4% and a new corporate supplemental net income (profits) tax is imposed. Strict property tax levy controls are imposed. It works... for a time. By 1980, property taxes adjusted for inflation are some 30% lower than in 1973. When Bowen leaves office the levy controls are relaxed. By the end of the decade, property taxes (adjusted for inflation) are back to 1973 levels. The doubling of the sales tax rate from 2% to 4% remains in place, along with the new corporate SNIT.

--2002. More fiddling with the sales tax in the hope of property tax relief. The results of this are obvious, or we wouldn't be debating the current property tax mess. All of this suggests that unless the property tax is totally ripped up by constitutional amendment, the assessment and collection mechanism dismantled, it will grow back. The PTR-inspired hikes in other taxes remain. That is our history. It is a terrible deal for taxpayers.

2. A vote in the 2008 legislative session for a constitutional amendment to repeal property taxes does not amend the constitution. It merely starts the amendment process. Amendments must be passed by two consecutively elected General Assemblies, then submitted to a referendum. Thus any amendment passed by the '08 Assembly must be passed by either the 2009 or 2010 legislatures, then submitted to the voters at the 2010 general election. The General Assembly does not need to decide on a "replacement revenue" package until the 2011 session.

3. What might such a "replacement revenue" package look like? The particular answer will come from the 2011 General Assembly and cannot be determined now (if for no other reason than forecasting state level taxes and property taxes out that far would be a most unreliable exercise. No one need be locked into any particular plan just yet. However, as an illustration that a replacement plan is feasible and less scary than many fear (we don't need to be talking about a 12% or 13% sales tax ... in fact, we should not be), consider just this one possibility.

Local sales taxes are generally very bad policy, for a whole host of reasons too numerous to mention in this short sketch. Sales and corporate taxes are best levied at the state level. It happens that roughly a 2% increase in the sales tax and a 2% increase in the corporate profits tax roughly take care of school propertytaxes. The loss of local control by the state assuming school property taxes is minimal. About the onlylocal control left is on building projects.

For local civil units, a statewide average increase in the individual adjusted gross income tax of about 2% suffices to replace local civil government property taxes, higher than 2% in some units, less than 2% in others.

Thus, a "2-2-2" plan~2% sales and 2% corporate profits at the state level for schools and a 2% average on personal income taxes for civil units—is about what would be needed. This is merely a ballpark projection to 2011.

There may be better plans, it's really a policy question for the General Assembly: do you want to make the trade of something like this in exchange for no-property-taxes-forever-on-anything? Everyone understands "zero."

4. Are there "practical problems? Of course. The two identified are how to make the civil government transition from a property tax base to an income tax base, and how to handle debt backed by property taxes. Without elaborating, the former can be handled using locator software (Map quest-type programs). The debt problem might be handled by treating the current state paid PTRC's as in lieu of property taxes (which they are) and paying PT-backed debt service from each unit's own PTRC.

Conclusion: Total elimination of the property tax via constitutional amendment is the only way to give property tax relief that will stick. The other tax action necessary to achieve this goal—in 2011-are large but not so scary as "a 13% sales tax." They are feasible. The question is for the General Assembly. Are we going to once again go down that 70-odd year path of failed PTR policies or are we going to rip the property tax up by the roots?

Posted by Hoosiers For Fair Taxation on Friday, January 4, 2008.