Walker Bill Would Be Step in Right Direction

Senator out to control local spending.

Published on: Jan 16, 2008

The Indiana State Senate Tax and Fiscal Policy Committee took a step toward indirect but effective property tax reform last week when it passed Senate Bill 18 out of committee. It's co-sponsored by Senator Greg Walker, R, Columbus.

"Approximately 24% of the net property tax levee is used for debt service, and the annual average increase of school and local debt was about 9.5% per year from 2000 to 2006," The south-central Indiana lawmaker says. "If we want to control property taxes, we must control government spending. This bill encourages local government to pay off debt rather than extend it."

One thing the proposed bill does is prohibit extension of bond pay-off dates. That's a tool various government entities have used in the past. Also, the bill would mandate that savings realized from refinancing must be used to repay debt or reduce levies. Without laws to the contrary, the temptation for county leaders and school officials alike has been to use that money to start new projects or make other improvements. It's another tool that financial advisors have been able to include in their bag of tricks to help schools and other entities figure out how to build projects they have their eye on.

The bill would also require that retirement of principle be paid at a steady level. Today, it's common instead for small amounts of principle to be paid early in the life of the loan.

One of the most critical things the legislation as passed out of committee would do is revise a new practice approved by the 2007 Indiana General Assembly. County Project Review Boards are to be set up to review any projects meeting a certain loan level- $7 million dollars in the legislation passed a year ago.

However, Indiana Farm Bureau and others have suggested that while $7 million might be a good floor in Marion and other growing counties, where big-dollar projects are the norm, rural counties can strap themselves with projects that are of less than $7 million in scope. That's because their tax base, especially in some counties, is significantly lower. So this bill would revise that legislation by lowering the trigger that calls for county project review to the lesser of $7 million or 0.5% of taxable assessed valuation. Such a change would give people living in less-populated, less industrial counties a voice in projects that while smaller in scope, could still put a big tax bite into their property tax bills if passed.

Stay tuned to learn the fate of this legislation.