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Sunday, June 27, 2004
Indiana Decisions - Chicago Tribune writes on Indiana property tax situation
"Indiana tax shift exacts harsh toll: Property owners see bills balloon" is the headline to this overview today in the Chicago Tribune. Some quotes:
Under the old "true tax value" system, property taxes were based primarily on three factors: the value of the land, often outdated; depreciation, based entirely on the structure's age; and the replacement cost of a structure as determined by a local assessor.The new system is based almost entirely on market value. But the effect of the switch in gritty industrial towns of the south shore has been acute.
Assessments on older homes, which make up a large part of the area's housing stock, were artificially low and the depreciation artificially high. In addition, heavy industries received a drastic reduction in their property values under the new system, leaving a gaping budget hole for local governments heavily dependent on the industries' property tax revenue. * * *
"Illogical" is a word often used to refer to the state's old property tax system. Typically, in assigning a value to a home, an assessor would use manuals on replacement costs and land values that were several years old, said Kurt Barrow, director of assessments for the local government finance agency. Depreciation, which could reach 80 percent of a home's value, was based on age only, regardless of how well maintained a home was or its restoration. Often an assessor would rely on his or her gut feeling when assigning a tax value.
Given that discretion, assessors often used it to stay in power or give breaks to friends. Occasionally, Lake County's practices led to federal indictments, as in the case of former Lake County Assessor Michael Jankovich, who pleaded guilty in 1987 to extorting payoffs for lowered assessments.
Under the system, about 60,000 of Lake's estimated 250,000 pieces of land were paying less than $200 a year in property taxes as late as 1999, Barrow said. * * *
Other parts of the state have experienced tax shock. But Lake County's pain is deep because of two factors. First, the special assessment significantly lowered assessments for U.S. Steel Corp., Ispat Inland Group Inc., International Steel Group Inc. and BP Products North America Inc., which collectively own nearly 9,000 acres in East Chicago, Gary and Whiting. Second, lawmakers increased the homestead tax exemption to $35,000 from about $6,000 as part of the new tax package, a move that allows thousands of homes with lower market value to continue paying next to nothing in property taxes.
By one estimate, the assessed value of the firms' properties plummeted to $328 million, from $1.15 billion a year earlier. That drop, combined with the homestead exemption, leaves an enormous tax revenue void to be made up in large part by owners of homes on the higher end of northern Lake County's property values.
A class-action lawsuit, filed in Lake Superior Court April 29 by Miller Beach residents, says the special re-assessment violates Indiana's constitutional ban on special legislation. The Indiana Supreme Court heard arguments on the case Wednesday, with a busload of Lake residents in attendance.
"The real and practical effect ... is catastrophic in proportions," the lawsuit states. "Ordinary people are subject to being ruined as to their finances, and as to their lives, to a degree and in a scope of numbers akin to a terrible plague or terrorist attack or horrific weather event or famine."
Posted by Marcia Oddi on June 27, 2004 03:42 PM
Posted to Indiana Decisions