Talking local government reform in Allen County

Benjamin Lanka has an article entitled “State presses local lawmakers to cut spending” in today’s Fort Wayne Journal Gazette. IAR is greatly encouraged by these comments from the Allen County Assessor and the head of Indiana’s Office of Management and Budget, Director Chuck Schalliol:

“Shalliol [sic] agreed that “people can be schizophrenic about it.” He said the state can either place hard caps on spending to limit growth, or local communities can look to make things more efficient through consolidations. For example, he said small school districts in rural counties could be merged to save on administration costs. He also said township government overlaps what city and county offices do.

Allen County Assessor Pat Love said the county council has asked the local assessing community to create a plan for efficiency, which she said could involve consolidating the township assessors with the county."

Desire for lakefront homes fuels hot market in Steuben County

Derrick Gingery reports in the Greater Fort Wayne Business Weekly that many large homes are being built around Steuben County’s lakes. Buyers from the Chicago, Detroit, and Indianapolis areas have been attracted by relatively lower prices. However, this demand has created solid local price appreciation:

“Average home values in Steuben County also have increased significantly since 1990, especially in the lake areas. Near some towns like Hamilton and Hudson, the average home value has increased 120 percent or more since 1990. County-wide the value has increased 111 percent in that time.

Values increased an average of 6.5 percent or more a year, going as high as 10 percent a year in the Orland area.”

Katrina victims in Indiana receive help in housing search

IndyStar.com reports that some of the nearly 5,000 people who fled to Indiana after Hurricane Katrina struck are looking for long-term housing. The Indiana Housing & Community Development Authority (IHCDA) is assisting these evacuees, and more detailed information can be found on the Authority’s website by clicking here. Lieutenant Governor Becky Skillman, who chairs the IHCDA’s Board of Directors, is quoted as saying:

"Our goal is to provide housing for all our southern guests displaced by Hurricane Katrina who are now living in Indiana.”

Note on a federal issue: Status of the Mortgage Interest Deduction

Many may take the federal income tax deduction for mortgage interest for granted, but homeowners and REALTORS® should be vigilant as national fiscal pressures intensify. This article from Yahoo News contains some sobering comments on a new report by the investigative arm of Congress:

“WASHINGTON (Reuters) - Tax breaks such as deductions for home mortgage interest and state and local taxes cost the federal government $728 billion last year and need to be reexamined, the Government Accountability Office said in a new report on Friday.

Comptroller General David Walker, who heads the agency, said the government must look at ways to rein in the growth of so-called tax expenditures if it is to avoid huge fiscal deficit problems in future years.

"We're on an imprudent, unsustainable fiscal path," Walker told a news conference. "The status quo is not an option and we're not going to grow our way out of this problem and the sooner we get started the better.""

Even more on property taxes for child welfare services

In today’s editorial pages, the Fort Wayne Journal Gazette takes on the hot issue of rising property tax levies to fund welfare services for children (click here or on the excerpt below to read the full piece):

"Indiana’s policy of requiring counties to finance the state-run Department of Child Services with local property taxes is unfair and lacks accountability. The practice is a perfect example of an unfunded mandate, and the state legislature should change it."

New Township Assoc. report suggests cost savings and better consistency if assessment moved to county level

IAR was in attendance at this week’s meeting of the Local Government Efficiency and Financing Study Commission at the State House. The Indiana Township Association (ITA) unveiled a report prepared by the IU-based Institute for Family and Social Responsibility. The report can be accessed on the main ITA homepage and covers townships’ three major duties: (1) property tax assessment; (2) fire protection; and (3) township assistance or poor relief. Although IAR supports broad, comprehensive reorganization of township government, assessment is the main area of interest for REALTORS®.

As written earlier here, our association agrees with the recommendation of the non-partisan Indiana Fiscal Policy Institute to shift all assessment duties to the county level. While the ITA’s report is most certainly not an endorsement of this position, its findings actually seem to bolster it. For example, the authors note that of all fifty states, only Indiana and North Dakota have a “Township / Municipal – County” structure in place statewide (although this system does exist in certain parts of three other states).

In addition, the report uses statistical analysis to project how eliminating township-level assessment would create tax savings through economies of scale. The authors conclude in part:

“While we do not presume to calculate a savings estimate for the state as a whole, the evidence available here do indicate that substantial cost savings could result if the primary assessment function were transferred from the township to the county level.” (Page 21)

Savings for only 27 of Indiana’s 92 counties were projected in the report. However, the statistical analysis suggests that the net annual cost reduction in most years would total almost $4.9 M in these 27 counties alone.

And while IAR certainly believes that tax savings should always be pursued, the primary objective of reforming our property assessment system should be to improve quality of the results. The ITA’s report also concludes that:

“It is likely that countywide assessment would create greater consistency of property assessments within the county because the larger scale of operations could permit hiring of personnel with greater skill and would permit administrative controls across the entire county.” (Page 7)

The authors of the report do cite three perceived advantages of assessment at the township level. However, IAR feels that even if these could be demonstrated to be true advantages that are unique to a township-based system, they would still pale in comparison with the benefits of moving to a county-based system. More on this at a later date…

Land use plan debated in Elkhart County

The Indiana Law Blog has picked up on a story in today's Elkhart Truth about the county's proposed comprehensive land use plan (the ILB's post has links to the actual draft on the Elkhart County homepage). The article's author, Thomas Bona, notes:

"Central to the debate was a proposal to push new development to the areas near cities and towns, limiting what could be built in rural areas. Supporters say that would preserve Elkhart County's agricultural character, while putting new homes on municipal utilities to avoid septic tanks."

Bloomington REALTORS® expand web-based services

Earlier this week, the Bloomington Herald-Times featured an article on expanded web-based services provided to area real estate professionals and homebuyers. The full text of the article is only available to subscribers, but it begins:

"For the competitive real estate market, Realtors and real estate agents know it is important to highlight their best skills and services."

The website operated by the Bloomington Board of REALTORS® can be accessed at www.Homefinder.org.

Child welfare property tax levy issue continues to simmer

As noted earlier, the issue of sharply increased property tax levies for child welfare services (which will affect PAY-2006 tax bills) has been receiving attention in many parts of the state. Benjamin Lanka of the Fort Wayne Journal Gazette reports:

“As county governments across the state prepare to squeeze their budgets into state-set spending limits, one segment of county property taxes is free to grow as much as is deemed necessary. That segment, coincidentally, is run almost completely by the state.

Property tax levies for county family and children service programs are increasing dramatically across Indiana. In 66 counties, the amount of property taxes requested for those services next year is $60 million more than allocated this year. This is a jump of 47 percent. Those numbers, compiled by the Association of Indiana Counties, do not include Marion or Lake counties, which have the two largest budgets.”

The article notes the mounting tension between local and state government over funding for these programs and indicates that the Association of Indiana Counties will focus on this issue in the 2006 session of the General Assembly. As IAR has written here, shifting more of the funding for welfare services to the state is not a new idea, but perhaps it will indeed happen soon.

Eminent domain issue in Floyd County

Courtesy of the excellent Indiana Law Blog, today’s Louisville Courier-Journal features a story on an eminent domain battle emerging right here in the Hoosier state. While this threat to private property rights may not appear as dramatic as Kelo v. New London, it is nonetheless a troubling development that warrants close attention:

“The dispute is over lawsuits filed last month by Thieneman Environmental LLC, a newly created sewer system. The company wants to take a 60-foot-wide swath of land from three neighbors to install a sewer line that would run from the company's planned plant in the Heritage Springs subdivision near Greenville to Jersey Park Creek. The subdivision's developers, Steve and Don Thieneman, also own the sewer utility.

"I'm going to fight it," said Anna Mae Gahlinger, one of the property owners Thieneman Environmental sued and a vocal opponent of Heritage Springs.”

IAR will continue to monitor this situation. At the Indiana State House, we will also be working with Representative David Wolkins (Chair) and his fellow members of the Interim Study Committee on Eminent Domain. This legislative committee is currently examining Indiana’s eminent domain laws and will hold its second public meeting on September 21^st (click here for more information).

Upside to slower appreciation: market stability

This is a late post of a weekend article (read it here via the Indiana Economic Digest) from the Greenfield Daily Reporter. The article is mainly about Hancock County, but much of it probably applies throughout the Central Indiana "doughnut".

"Predictions of a looming collapse of the robust national housing market may be less of a threat in a central Indiana, according to local experts. “We have been lucky because we are seeing steady growth in home values,” said Jim Litten, an agent for the F.C. Tucker agency. “We haven’t seen the kinds of value explosions that they have experienced on both coasts.”"

Local option income taxes and "banked" levies

The State of Indiana announced yesterday that the amount of local option income tax revenue that is distributed to local governments will increase sharply in 2006. The Evansville Courier & Press notes that since locals are now preparing budgets, this is most welcome news. The official news release and totals by county can be read here and features this information:

“Governor Mitch Daniels announced today that the 89 counties with one of three allowed county income taxes will receive an average 18.8 percent more money in 2006 than in 2005. Distributions in 2005 were essentially unchanged over 2004 at approximately $940 million each year. In the distribution for 2006, announced by the Department of Revenue today, the state will provide more than $1.1 billion, $177 million more than this year. All but two counties will receive more money in 2006.”

IAR hopes that any windfalls will be used to mitigate potential property tax hikes. This is apparently being considered in Fort Wayne, where some officials want to use part of the city’s share of boosted tax distributions to reduce a planned levy increase. This FW Journal Gazette article has more detail, including these interesting comments that relate to SEA 1 from 2004:

“Moll said the legislature has put the city in a bind because it eliminated the reserve levy. The state used to keep increasing the total amount the city could collect in property taxes, giving officials a cushion in case they had to raise them in an emergency. Over the years, Fort Wayne built up a cushion to the point where it could raise taxes $24 million in one year if it needed to. Now that ability is gone, pressuring officials to raise taxes the maximum each year.”

The reserve levy being discussed is also called a “banked” levy, and it did indeed provide a cushion for units that raised their operating levies below the maximum allowable level in some years. A governmental unit used to be able to “carry forward” that unused levy capacity, but this was eliminated by SEA 1 after some officials were suspected of tapping their banked capacity under the cover of reassessment-related confusion.

Eliminating the use of banked levies probably saved taxpayers money in the short term, but it also punished units of local government that had been frugal and planned for emergency spending needs. Now there is virtually no incentive for any unit to request a levy increase that is below the maximum—it’s basically a “use it or lose it” proposition. Whether or not this policy change saves taxpayers money in the long term is less clear.

More on child welfare levies (Marion County)

The Indy Star has another article on rising child welfare property tax levies in today's paper. The Marion County Department of Child Services is requesting a 46% increase in its budget. The Star estimates that the full increase would increase the property tax bill on a $100,000 home by $78 next year.

"Regardless of the final outcome, Bowes and Carmin admit there are benefits to the public debate about the budget. "Maybe people will see how big this problem is and want to look more carefully at how we can fix it," Bowes said. Carmin added: "I don't think the general public clearly understands the volume and nature of the problems.""

Statewide home price appreciation up, but not by much

There was a little bit of good news in the quarterly report published yesterday by the Office of Federal Housing Enterprise Oversight (OFHEO). The report covered home price appreciation from Q2 2004 through Q2 2005, and the PDF version can be accessed in its entirety here.

The good news is that Indiana’s one-year increase in the statewide average home price was 4.70%, which is higher than the 4.09% reported in OFHEO’s last quarterly release covering Q1 2004 through Q1 2005. The bad news is that even at 4.70%, Indiana still ranked 50^th out of all 50 states and the District of Columbia (only Texas lagged behind Indiana).

As noted below in a post on solid price gains in northwestern Indiana, some markets appear stronger than others. IAR will post more about how individual markets rank soon.

REALTORS® Relief Foundation

In light of the terrible tragedy that has struck the Gulf Coast, we thought we would remind members of the REALTORS® Relief Foundation established by the National Association of REALTORS®. You can find out more information here and donate by clicking here.