Friday, April 24, 2009


April 24, 2009
By John Byrne and Jon Seidel
Post-Tribune staff writers

INDIANAPOLIS -- Indiana's first land-based casino could take root in Gary near the Borman Expressway under an ambitious 11th-hour plan Northwest Indiana legislators announced Thursday that would pay for a new teaching hospital in the city and other major regional projects using tax money generated at the new gambling emporium.

Proposed amendments to House Bill 1607 would also give Gary unique authority to use money collected from the lease of the Gary-Chicago International Airport on infrastructure improvements and other projects throughout the city.

The bloated legislation also retains its original purpose, to allow creation of a four-county transportation district to govern rail and bus service in Lake, Porter, LaPorte and St. Joseph counties.

But the package took on the feel of a Gary stimulus package at a conference committee hearing Thursday, with local representatives pointing to the struggling city's two casino licenses and its airport as the best assets to leverage as it attempts to remain solvent in the short term and forge a successful future in the long-term.

The proposal is sure to face opposition from some legislators who will wonder why Gary deserves such special treatment in the waning hours of the legislative session.

The casino financing package would require the amounts of admission and wagering tax revenue collected at one of the Don Barden-owned casinos in Buffington Harbor be recorded as of May 15.
Whenever a new casino opened on the south side of the city near Interstate 80/94, any increase in those tax revenues above the May 15, 2009, levels would go to three local projects: a teaching hospital in Gary; the West Lake corridor of the South Shore commuter rail extension, from Munster to Lowell; and the Marquette Plan to clean up and develop the lakeshore.

Those are dollars that would normally go to the state general fund, making it potentially problematic to garner downstate support for the plan.

No public input.

And Rep. Cleo Duncan, R-Greensburg, worried about HB 1607 undergoing wholesale changes without the benefit of the public hearings bills usually receive in the House and Senate.

"It has not passed either chamber and we're down to the nitty-gritty," Duncan said.

Rep. Chet Dobis, D-Merrill-ville, urged Duncan to consider what it would mean to the state if Gary went bankrupt.

"We are trying to help ourselves with this plan," Dobis said. "There are negatives, I concur. But if you want to see negatives, wait till you see the bottom line at the (Distressed Unit Appeal) Board when it reaches its conclusion" on Gary's request for state aid.

Support from Mitch

Gov. Mitch Daniels said this week he would be open to granting Gary the state's first land-based casino.

"As somebody who came late to this party, I've never understood why they have insisted on clinging to the illusion that these casinos are water-based anyway," Daniels said. "So if this is something the City of Gary feels will be helpful to them, I'm certainly willing to look at it."

Then there's the question of who would pay for a new casino in Gary.

Thursday's amendment requires the owner of the license to spend at least $150 million on the facility, though Sen. Earline Rogers, D-Gary, predicted it would cost much more than that to erect a large-scale casino on the expressway.

Barden has had well-publicized money problems lately, and Rogers speculated he might sell the license or seek partners to defray the cost.

Barden said Thursday he hadn't had a chance to see the proposal. He declined to comment on the particulars or whether he plans to sell one of his Gary casino licenses.

"I don't have any plans to do anything about anything at this juncture," Barden said.

Clay lauds plan

Gary Mayor Rudy Clay greeted Thursday's developments as a welcome piece of good news for the beleaguered city.

The casino could generate $240 million over the next decade, Clay said, and the casino-hospital project could create 5,000 jobs.

He praised lawmakers, including his sometime political antagonist, Rep. Charlie Brown, a longtime supporter of a four-year medical school and teaching hospital in Gary.

"For the last two years he has really been on the front lines of pushing and bringing people together for the four-year medical school," Clay said.

HB 1607 started as a far-reaching, controversial plan to create a one-of-its-kind four-county transportation district with taxing powers in northern Indiana.

The transportation language remains in HB 1607, though it, too, underwent significant changes at Thursday's meeting of a bipartisan House-Senate conference committee with less than a week remaining in the General Assembly session.

Rather than separate May 2010 referendums, Dobis proposed a single, regionwide ballot question in November 2010. If a majority of voters in the whole four-county area wanted to participate, all four counties would become members.

Mayors from Gary, Hammond, Valparaiso, Portage, and the four largest cities in LaPorte and St. Joseph counties would sit on the board, which would have the power to levy an income tax up to 0.25 percent in each county to mass transit capital projects and operations.

Daniels would still appoint the ninth member, from among elected officials in the four counties.

"The mayors in all four counties would be more the beneficiaries than the counties," Dobis said.

Contact John Byrne at 317-631-7400 or jbyrne@post-trib.com.

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.