To trend or not to trend...

Lesley Stedman Weidenbener of the Louisville Courier-Journal covered the status of trending, or the annual adjustment of real property assessed values, in a column yesterday. Trending is a complex concept, but her article makes it clear and also explains why it may or may not be delayed in the 2006 session. Click here to read "Property tax rules might be changed slowly".

Housing market overview for Delaware Co.

Yesterday’s Star Press reported on a meeting of the Ball State University Business Forecasting Roundtable (click here for the article). The outlook for housing in Muncie and Delaware County was rather positive, despite job losses in the region’s manufacturing sector:

Housing values have increased for four consecutive years in Delaware County and showed about a 4-percent increase year-over-year in 2005, [Jim Kouns, of Coldwell Banker Lunsford] said. According to the MLS data, 82.5 percent of homes purchased in the county last year were valued at $150,000 or less.

Realtor Mike Lunsford said he was amazed how resilient the market has been, even in the face of a declining job market over the last decade.

"Think back with me to losing ABB, BorgWarner's transmission business, Delco and Ball Corporation, all of which occurred in a period of about 18 months," Lunsford said. "This market was able to absorb virtually all of this inventory in about 18 months.

Seniors in MA can work to reduce tax bills

We came across this innovative method of property tax relief via the Citizens for Tax Justice's Talking Taxes blog:

Mayor Thomas McLaughlin [Woburn, Massaschusetts] has announced the "Senior Citizen's Property Tax Work-off Program." The goals of the program are:

1) To assist the senior citizens of the city of Woburn with payment of residential property tax bills.

2) To increase the involvement of our senior citizens in the municipal government and the school system of Woburn.

3) To acknowledge and affirm the skills and ability of our seniors and the community's continuing need for their services.

Up to 20 participants in this pilot program can earn $6.75 hourly which will then be credited against their property tax bills. One of the agencies where seniors might be placed is the Department of Public Works, which brought to mind the image of seniors shoveling snow or digging trenches to pay off their property taxes. But after reading through the details of the program we learned that “no job will require heavy physical exertion.” Phew!

Bloggers welcome at NAR meetings

The Center for REALTOR® Technology is going to make facilities available to real estate bloggers at future NAR national meetings. It looks like there will be Ethernet jacks, Wi-Fi, snacks, and coffee provided. You can read more about it here.

Follow-ups to two earlier posts

Our most recent post entitled “Local government streamlining update” should have clarified that HB 1344, which dealt only with Vanderburgh County government reorganization, did not advance. It was essentially absorbed into HB 1362, although the referendum process is now much more streamlined than it would have been under HB 1344.

Also, we have obtained a summary of how HB 1008, the Major Moves legislation, has been amended. The summary itself is three pages long, as the Senate Appropriations Committee made many tweaks in addition to a handful of “major” changes (no pun intended). Here is an overview:

• The amendment took out the ten-year freeze on toll rates, but it provides a refundable state income tax credit for individuals. The credit (not a deduction) would equal 50% of the tolls paid up to a maximum of $300 annually.

• Any new projects requiring tolls, including the I-69 extension to Evansville, would have to be approved in future sessions of the General Assembly.

• Under the current version of HB 1008, the I-69 extension as proposed could not terminate in Perry Township of Marion County.

• A new trust fund was created to receive $400 million of the $3.85 billion in proceeds from the Toll Road lease. This “lock box”will earn interest until the balance reaches $1 billion. At that point, only the earnings above the $1 billion figure may be spent for road construction and improvements.

• Additional distributions are made to local units of government as follows:

• $150 million to be shared by all local units of government over the next two fiscal years;
• $20 million to the Northwest Indiana Regional Development Authority;
• $30 million each to LaPorte, St. Joseph, Elkhart, LaGrange, and Steuben Counties (but another RDA for northeastern Indiana is not created); and
• $25 million to Porter County and $15 million to Lake County

Local government streamlining update

Early this morning, legislation aimed at a compromise on Mayor Bart Peterson’s Indianapolis Works initiative was amended into SB 1. As it will soon read, the bill will not consolidate property tax assessment at the county level but will phase in a unified Marion County fire department. You can read Indianapolis Star editor RiShawn Biddle’s running update by clicking here.

HB 1362, which deals with local governments in all other 91 counties, passed out of a Senate Committee yesterday afternoon. The bill was changed to facilitate streamlining in a handful of the largest counties (Lake, Allen, St. Joseph, Vanderburgh, etc.). Jennifer Whitson of the Evansville Courier & Press has a great recap (register to read the full article here):

On Wednesday, the committee altered the bill to make the process more likely to lead to consolidation in counties with a population of more than 170,000, which would include Vanderburgh and about five other counties.

Under the amendment, offered by Sen. David Long, R-Fort Wayne, the petition to begin the process would require the signatures of only 5 percent of registered voters.

Also, once a plan is adopted by the legislative bodies, a simple majority vote of all county voters would be necessary to put the plan into place. Long's changes also would bar any consolidation plan from requiring rural residents from assuming city bond payments and debts as part of a consolidation.

Long said city residents are also county residents and pay county taxes, so they should have an equal say in whether to consolidate.

"To separate my (city resident) vote out and say my vote doesn't count when dealing with a county issue is a mistake, I think" he said.

IAR supports the changes made yesterday, which include the clarification that pension or bonding debt incurred by one local unit cannot be foisted onto another unit after a merger or consolidation.

Major Moves advances with changes

HB 1008 passed out of the Senate Appropriations Committee after being amended. One change requires future legislative approval of public-private partnerships like the one proposed by Governor Daniels to facilitate the I-69 extension. Another amendment mandates that the planned I-69 route be changed to bypass Perry Township in Marion County.

Property tax bill gets major overhaul

HB 1001, the primary property tax-related bill in the 2006 session, changed dramatically yesterday. Gone from the bill are changes in the property assessment structure and an increase in the state-paid Homestead Credit for taxes paid this year. IAR has supported both of these elements and believes that they could very well reappear later in this session.

The Senate Tax and Fiscal Policy Committee chose yesterday to take a broad approach to property tax reduction. An amendment offered by Senator Gary Dillon (Pierceton) would give counties the ability to increase local option income taxes provided that 100% of the new revenue would reduce property taxes. The House of Representatives has indicated a strong reluctance to support such tax shifting, but this move could rekindle discussions.

Senator Luke Kenley (Noblesville) also introduced a new concept designed to mitigate impacts of “trending” for homeowners. Trending, or the annual adjustment of real property assessments, will begin to affect tax bills next year. HB 1001 was amended yesterday to create an inflationary Homestead Deduction that would rise along with the statewide average AV of homes. This means that in 2007, the current $35,000 deduction could jump to something approaching $40,000 (or more) and would likely rise by a smaller amount each year thereafter.

Lesley Stedman Weidenbener has an excellent article about the new version of HB 1001 in today’s Louisville Courier Journal (click here to read it).

The House and Senate approaches to the property tax problem are so radically different that the “end game” is rather unclear. Unfortunately, the amendments offered yesterday deleted provisions that would have reassigned responsibility for property tax assessment from Indiana’s 831 township trustee-assessors to the county level.

IAR remains hopeful that this much-needed reform can be revived. Because the House-passed version of HB 1001 contained these provisions regarding township-trustee assessors, the concept can be included in the final package. Please let your Representatives and Senators know that better assessment matters to homeowners and helps eliminate distortions in real estate markets. We will continue working to make sure the voice of our industry is heard on this issue.

Kansas state association blogging

We recently learned that the Kansas Association of REALTORS® has a blog focused on legislative updates, and you can view it here. We doubt that the Indiana Real Estate News (IREN) Blog and the KAR Legislative Blog are the only two state or local REALTOR® association sites out in the blogosphere, so if anyone knows of others please email us at:

blogger@indianarealtors.com

Indy Star runs the numbers

In this Sunday’s paper, the editorial board of the Indianapolis Star used numbers to highlight issues that should be addressed by the General Assembly this session (read the full editorial here). The numbers 5 and $44,000 jumped out at us as particularly important:

5: The number of local governments to which the average Indiana resident must pay property taxes.

The problem: Think you have just one local government to worry about? Not a chance. Thanks to Indiana's antiquated system of local government, an array of counties, cities, townships, library boards and other agencies feed off property taxes.

Why you should care: Such complexity makes it difficult for citizens to either hold local officials accountable for rising costs or benefit from short-term property tax relief.

Corrective reform: Overhauling local government and reducing the reliance on property taxes are the best long-term solutions. For now, simplifying property tax bills, a feature of the now-stalled House Bill 1001, would go a long way toward improving accountability.

$44,000: The assessed value of a home worth $100,000 on the market in Sullivan County's Cass Township.

The problem: A home bought for $100,000 should be valued as such by township assessors. But, according to a study released last year by the Indiana Fiscal Policy Institute, homes all over the state are subject to wide disparities in assessed value.

Why you should care: This is one reason why the 2003 reassessment was far more wrenching to taxpayers and governments than it had to be.

Corrective reform: State senators should help eliminate township-level assessment and hand those functions to county assessors by approving HB 1001. Amending the bill to abolish elected township assessors in Marion County also makes sense.

As noted above, HB 1001 is the likely vehicle for addressing these issues (although HB 1362 also deals with streamlining local government). The chair of the Tax and Fiscal Policy Committee, Senator Luke Kenley, has scheduled HB 1001 for another hearing at 9:00 AM this coming Tuesday. Look for a report here in the early afternoon.

Preview of next week's legislative action

Jennifer Whitson of the Evansville Courier & Press writes today (link) that the General Assembly is headed into “crunch time”:

The deadline for bills to be adopted by a committee is Thursday. Then there's one more week for a bill to pass either chamber. After that, conference committees form to hash out differences between House and Senate versions of bills. The short session must end by midnight on March 14.

But with these deadlines looming, many of the major topics under consideration are still in flux.

One of these topics still under consideration is Governor Daniels’ Major Moves program. The legislation is contained in HB 1008, which is currently before the Senate Appropriations Committee. Committee members will vote on this bill Thursday, but we expect some changes to be made. Sunday’s Elkhart Truth has this report about the intentions of Senator Joe Zakas of Granger (St. Joseph Co.):

Zakas said he will propose setting aside a portion of the $3.85 billion Indiana would receive from leasing the Indiana Toll Road into a "next generation trust fund." The objective of the trust fund would be to assure that the state in 30 years will have $1 billion for road maintenance funding. The senator believes the state would have to set aside $280 million from the lease deal to accomplish that goal.

"People have been concerned about the length of the lease," Zakas said. Many critics of the governor's plan to raise money to meet all current road construction needs worry that the state will nothing to show from the deal after the 10-year window of the plan runs out.

Senator Zakas also plans to provide an income tax credit for Hoosiers who use the Indiana Toll Road. Such changes should help secure enough support for passage of this critically important legislation.

IAR has already endorsed Major Moves, and REALTORS® are lending their support all over the state. We caught this in The (northwest Indiana) Times’ coverage of Friday’s town hall meeting with the Governor in Crown Point (Lake Co.):

A few people used the opportunity to make statements in support of the governor's plan.

"For 20 years I've watched jobs move across the state line to Illinois, where they can move goods quicker, easier, and more efficiently," said Brenda Miley, a Realtor with Prudential Partners Real Estate.

Greater Northwest Indiana Association of Realtors President Megan Cecil read a statement from the association in favor of Toll Road privatization. She also issued a personal plea that the governor see his plan through so that her 6-year-old daughter can someday find a good job here.

Kudos to those taking such an active part in the process. We will have a report for you on HB 1008 this Thursday from inside the State House.

Update on legislative action

The Senate Appropriations Committee heard testimony on HB 1008 (Major Moves) this morning. IAR attended the hearing and voiced our support. No final committee vote was taken today, however. Amendments will likely be offered next week with a vote on Thursday the 23rd.

Next week will be a very busy week with final committee action on local government streamlining and property tax-related legislation. IAR is working to ensure that reform of Indiana's broken property tax assessment system happens this session. There is little need for us to restate our position on this topic, but we encourage you to read our op-ed letter now appearing in newspapers around the state anyway. Here is a sample:

Land assessments unfair to owners

By Karl Berron

Are you paying your fair share of property taxes? Do you trust your property assessment?

Unfortunately, according to recent research conducted by the Indiana Fiscal Policy Institute, the answer from many taxpayers should be no. Meanwhile, the next five weeks will determine whether the General Assembly will finally act to fix this troubled system.

The bottom line of the institute’s research is that many Hoosiers continue to pay more than their fair share of property taxes. Our broken assessment system is the reason. As other assessing experts have suggested for decades, the Indiana Fiscal Policy Institute recommends moving the assessment function to the county level rather than the state’s 1,008 townships.

Click here to read the full version printed by the Fort Wayne Journal Gazette.

State House scare

The capitol building was shut down just a bit ago after a suspicious substance was found.

Apparently there is no longer any danger, as we are now back inside and committees have resumed their afternoon hearings.

The case of the $400 million dollar home

The story of the Valparaiso (Porter Co.) home mistakenly valued at $400 million for property tax purposes made the Inman News today, and it has been picked up by mainstream media outlets all over the country (here's an example). Click here to read about it from The Times of northwest Indiana. The saga continues with this article in today’s Chesterton Tribune.

Government reorganization bills still moving forward

In the 2006 session of the General Assembly, all introduced bills have now either “died” or they have passed the house of origin. To see which bills are still alive, click here (gray text indicates that a bill is dead). The session’s “second half” is well under way, but as noted by the Elkhart Truth’s editorial last Friday, most anything can still happen.

One topic that has received less attention than Major Moves and telecommunications reform is local government reorganization and consolidation. IAR supports efforts to give communities greater ability to streamline the archaic, multi-layered system we have in Indiana today. We also feel that some reforms, like fixing the state’s broken property tax assessment system, cannot afford to wait and should be addressed by legislation this session. Here is a rundown of the legislation we are watching this February and March:

* HB 1001 (Espich) – Reassigns responsibility for property tax assessment from 831 township trustee assessors to the county level.

* HB 1344 (Hinkle) – Creates a local government efficiency commission to study consolidation in Evansville and Vanderburgh County. In its current form, consolidation can only move forward if a majority of voters in both Evansville and elsewhere in Vanderburgh County approve in this November’s general election.

* HB 1362 (Buck) – Establishes a general framework for nearly all political subdivisions (including school corporations) in Indiana to voluntarily merge.

* SB 1 (Young) – This bill is part of the larger debate over the Indianapolis Works! program. It does not currently consolidate assessment at the county level or merge township fire departments, but we hope that the final version will contain these elements.

Both HB 1362 (along with HB 1344) will be heard on Wednesday the 15^th in the Governmental Affairs and Interstate Cooperation Committee. It is exciting to see that some communities are already considering how they might reorganize under HB 1362 to save tax dollars and provide better service—this report appeared in today’s Fort Wayne Journal Gazette (full text here):

The discussion complements the General Assembly’s consideration of a proposal to give local governments wide leeway to consolidate without seeking legislative approval. The House approved the proposal, House Bill 1362, by a 73-23 vote, and the Senate Government Affairs and Interstate Cooperation Committee is scheduled to consider it Wednesday.

With many local officials keeping mum or voicing skepticism about consolidation, the council wisely wants to begin now to consider specific consolidations.

“We want to keep the debate alive,” said Councilman Cal Miller. If the General Assembly approves the enabling legislation, Allen County government will have a head start in planning consolidation.

Outlook good for Evansville-area real estate

From last Friday’s Evansville Courier & Press (read full article here):

Low real estate prices and a central location make Evansville an attractive option for businesses considering an expansion or relocation, according to Dannetta Hiatt of F.C. Tucker Emge.

But, a lack of suitable large-scale industrial space is forcing many of those firms to go elsewhere, Hiatt said during the annual "State of Real Estate Report," presented Thursday at the Executive Inn.

News from Indiana Economic Digest

* Johnson County homebuyers move up: Jump in average price of new homes due to families wanting more space (Link)

* Downtown Valparaiso rail stop in talks: Consultant says could lead to residential and commercial development beneficial to city (Link)

* State of Greater Lafayette Real Estate: Overall status encouraging (Link)

* Homes opposed in Whiteland: Residents say they want commercial development, not residential (Link)

NW Indiana REALTORS® endorse Major Moves

HB 1008 was heard in the Senate Appropriations Committee yesterday but no vote was taken. Some changes to the legislation are being discussed, but overall support for the plan continues to grow. This letter of endorsement appeared in today's NW Indiana Times:

The Greater Northwest Indiana Association of REALTORS®, representing nearly 2,500 real estate professionals in Lake, Porter, Jasper and Newton counties, applauds Gov. Mitch Daniels for bringing forward the bold Major Moves plan.

After careful examination, we feel this proposal offers tremendous opportunity for both our region and Indiana as a whole. The plan appears to return much of the value created by the Toll Road lease to our communities and the Regional Development Authority.

Investment in our transportation infrastructure is vital and job creation is our number one economic development priority.

For these reasons, we endorse the Major Moves program and HB 1008.

Megan Cecil, 2006 President, Greater Northwest Indiana Association of REALTORS®

A new website has also been launched that addresses some of the most common questions about the program. Click here to view the official Major Moves website.

New home construction in Central IN

According to the NY Times’ Walk-Through real estate blog, Marketwatch has reported that cancellation rates for Centex homes were up in several markets during the last quarter. While most the areas noted were formerly "hot" markets like Phoenix, San Diego, and Sacramento, Indianapolis was also mentioned.

By itself, however, this hardly indicates slowing demand for new housing in Central Indiana. According to a January 29^th news release from BAGI (click here for the full release), permit activity has been stable:

Single-family permit activity in the Indianapolis nine-county area unchanged in December compared to December of last year, according to figures compiled by the Builders Association of Greater Indianapolis. December permits numbered 826 compared to 826 for 2004. A total of 13,093 permits have been issued year-to-date, a fractional increase from a total of 13,046 for 2004.

Property taxes and eminent domain

HB 1001 and HB 1010 (dealing with property taxes and eminent domain, respectively) were heard today in Senate committees, although both bills were "held" and will be voted on at future meetings. The initial hearing on HB 1001 in the Tax and Fiscal Policy Committee lasted more than 4 and ½ hours. IAR testified in support of streamlining the property tax system by moving assessment responsibility from townships to the county level.

Township officials testified against the provisions in HB 1001 that would reassign the assessment function to the county assessor. Their main argument seemed to be that recent legislation mandating better training would address most of the system's problems. IAR disagrees, and we feel that the level of certification is not the central issue. Even if all 1,008 township-level assessors were fully certified, the system would still have far too many units to be manageable and would still lack accountability.

We went to the webpage of the International Association of Assessing Officers to research how Indiana's structure differs from other states. We found a survey of assessing practices in all 50 states and Canada by Richard Almy, one of the leading experts in this field (click here to view the PDF). The map labeled Exhibit 3-4 on the seventh page (or page 47 within the document) is rather compelling. It shows that Indiana is one of only a handful of states with 1,000 or more assessing units. Most states place responsibility for this function at the county level. Texas has only 253 units, and California has just 59. Ohio has 88 assessing jurisdictions and Kentucky has 120.

While it is true that a few states have more assessing jurisdictions than Indiana, it must be noted that some have a mixed system with both township and county-level assessing (like Illinois). Others like Michigan and Wisconsin use municipalities as the unit of assessment, which avoids Indiana's problem of the township / county overlap.

As we have written here before, there are many good assessors trapped in a bad system. IAR will continue to push for a streamlined structure that will improve uniformity and taxpayer equity.

HB 1001 to be heard today

As noted in this Indianapolis Star article, HB 1001 (Espich) will be before the Senate Tax and Fiscal Policy Committee today. IAR will be there to speak in favor of several components of the bill, especially the reassignment of assessing duties from township trustees to the county level.

The Indiana Township Association (which opposes consolidating the assessment function) recently posted its position on HB 1001 on its website here, and we expect these points to be raised today. Check back for an update on the hearing this afternoon.

Orange Co. real estate market hits jackpot

Laura Lane of the Hoosier Times reports that the long-awaited casino in Orange County has created a real estate mini-boom. You can read the full article here courtesy of the Indiana Economic Digest.

Homes are selling for 25 to 30 percent more than they would have gone for just two years ago. Some developers report getting up to twice what they paid for properties. And prices will continue to climb as the French Lick Springs Resort & Casino's opening date, late this year, gets closer.

"Marketing time used to be six months, or longer," said [E. Brooks] Galloway, who has seen about a 50-percent increase in the number of listings at his agency. "Now, fairly priced properties are on the market three months or less, sometimes just a day or two."

Beige Book report on Midwest economy

The Federal Reserve Board released a series of its Beige Book reports about a week back (link). According to the FRB website, these reports are generated from anecdotal information on current economic conditions through reports from bank and branch directors and interviews with key business contacts, economists, market experts, and other sources .

As you can see here, our state is split with central and northern Indiana in the 7th District (based in Chicago) and southern Indiana in the 8th District (based in St. Louis). With apologies to those in our southern counties, here are some highlights from the January 18th report for the 7th District:

• Auto dealers in northern Indiana reported a pickup in demand in December, while dealers in Wisconsin said that sales remained slow.
• Construction and real estate activity was mixed by both location and market segment. Residential activity was gradually slowing from record levels. One Chicago-area homebuilder noted that suburban homes were taking longer to sell and that builders were increasing incentives to close deals, while a Realtor in Wisconsin reported taking a less aggressive stance on list prices.
• Commercial construction and real estate continued to expand, but at a slower pace than in the previous reporting period. Activity picked up in Indiana, Wisconsin, and mid-Michigan, but was flat in the Chicago area. Office vacancy rates fell in Indiana and southeast Michigan.
• The manufacturing sector strengthened in December. Nationwide light vehicle sales picked up at the end of the year, and one contact noted that the gain did not reflect a boost in fleet sales to achieve end-of-year sales goals.
• Activity in the construction equipment industry continued at a brisk pace. Industry participants were optimistic about the outlook for 2006, saying that strong demand for nonresidential building would offset any slowdown in housing.
• District toolmakers reported solid orders growth and expressed confidence about the outlook for 2006. Conditions in the steel industry continued to be strong, with growth in orders across several end-user markets. Steel inventories were below desired levels, and they were being rebuilt.
• Lending activity moderated further. Bankers noted declines in applications for both home-purchase and refinancing mortgages. Usage of home equity lines of credit remained stable. Reports on mortgage credit quality were mostly favorable, though one Chicago-area banker expressed concern that home equity loan delinquencies continued to drift up.
• There were mixed signals regarding farmland values, with more contacts reporting that values have stopped rising and leveled off.

Major Moves passes House

After one of the most extensive and spirited debates of this session, HB 1008 passed the Indiana House of Representatives on a 52-47 party-line vote. The debate lasted approximately four and one-half hours.