Details Of Property Tax Plan

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(STATEHOUSE) - Legislators will vote today on a proposal to cut and cap property taxes, and a constitutional amendment to make those caps permanent.

Negotiators announced a deal early Thursday, and House and Senate leaders held out hope of sending it to Governor Daniels Thursday night, a day before the deadline to adjourn.

But Senate Democrats complained they didn't receive the mammoth bill until 9:45pm, and needed more time to go over the details of the plan before deciding whether to support it. The package appears to give Governor Daniels most of what he wanted, including an immediate 25% cut in the average homeowner's bill, and a cap on future bills at 1% of a home's value, 2% for farms and rental properties, and 3% for businesses.

A 3% circuit breaker for businesses was already scheduled to take effect next year. That limit rises to 3.5% next year under the compromise, as negotiators agreed to impose all the caps a half-step at a time.

The constitutional amendment would have to be reapproved in 2009 or 2010, then sent to voters in November 2010 for final approval.

It would take effect in 2012. As expected, the package abolishes most township assessors, with a referendum this fall on those in the 44 largest townships. It ends property tax funding of school operating expenses, shifting that spending to the state. And it increases sales taxes by one point to 7%, to make up for the cuts in property tax dollars.

Legislators struck a compromise on Republicans' call for referenda to approve school and local government construction projects. Republicans had wanted voter approval for any project costing more than $6 million, a threshold that would have covered nearly all construction.

The proposed deal lets local leaders avoid referenda by holding the line on costs. The price tag to trigger a referendum varies for different types of projects, with one limit for high schools, another for elementary schools, and a third for other projects.
Schools can also seek voter approval to go beyond the tax caps for other spending outside the general fund, such as transportation costs.

The package includes police and fire pension relief for cities, and $120 million in transition money to help schools adjust to the tax caps. A nine-member board will have the authority to override the tax circuit breaker for the hardest hit cities. And the constitutional amendment makes a seven-year exception for Lake and Saint Joe Counties -- their debt payments will be outside the caps.

House Speaker Patrick Bauer says taxpayers are guaranteed relief, thanks to school and welfare costs moving to the state. He's less sure the safety net for schools and local governments will hold -- he notes legislators will have at least a year of data to look at before giving the constitutional amendment final approval.

The proposal gives senior citizens extra relief. In addition to capping their tax bills at 1% of their homes' value, the plan would limit any increases in their bills to 2% a year.

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