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Sunday, November 30, 2008

Ind. Law - Still more on "Approving a proposed constitutional amendment that would put limits on property-tax bills, so it can be put on the ballot for ratification in 2010"

Updating this Nov. 9th entry quoting a story by Lesley Stedman Weidenbener of the Louisville Courier Journal, and an entry from Nov. 11th quoting an editorial from the Fort Wayne Journal Gazette, today we have another Weidenbener article, plus an editorial from the Indianapolis Star.

"Property tax battle turns to timing of vote: Some want to wait to see effects" is the heading of today's LCJ story, that begins:

When it comes to timing, it doesn't matter whether the Indiana General Assembly approves a proposed constitutional amendment limiting property tax bills in 2009 or 2010.

Either way, the question would appear on the ballot for voter ratification in 2010.

Yet whether lawmakers should tackle the amendment next year could prove one of the most contentious debates of the upcoming session.

Republican leaders say the vote should take place in 2009 because it's a continuation of a larger property tax package passed this year, a sort of promise they feel they made to voters and one that they're not willing to ignore.

"I'm not convinced -- when I think about how upset people were with their property tax bills before we did this reform and the level of concern and outright suspicion that these were only going to be temporary fixes -- that we can afford to backslide on the issue," said Senate Appropriations Chairman Luke Kenley, R-Noblesville.

But local officials and Democratic lawmakers favor waiting until 2010 so they can better gauge how the limits will reduce revenue for many local governments and schools. They'll get their first glimpse of that impact next year, as the limits -- which have already been written into state law -- are phased in.

"We're going to have an experimentation with property tax caps," House Speaker Pat Bauer, D-South Bend, said about the phase-in.

"We'll see what happens," he said. "Experience is a great teacher."

Starting next year, homeowners' bills can be no more than 1.5 percent of assessed values -- unless local voters have agreed to spend more through a referendum. That means the annual tax bill for a $100,000 house could be no higher than $1,500.

For the owners of rental and agricultural property, the limit will be 2.5 percent of assessed value. For businesses, it will be 3.5 percent.

In 2010, the law requires that the limits be lowered to 1 percent for homeowners, 2 percent for landlords and farmers, and 3 percent for businesses. For a $100,000 house, the bill could then be no higher than $1,000.

Gov. Mitch Daniels and some lawmakers are concerned that future legislatures might eliminate or adjust the limits if they exist only in state law. So as part of the larger tax package, the General Assembly earlier this year took the first step to put the limits in the Indiana Constitution.

But in Indiana, amendments must be passed by two, consecutively elected legislatures before they can be placed on the ballot for ratification. That means lawmakers must approve the same amendment in either 2009 or 2010 to make it eligible for voter consideration in the next general election. There is no 2009 general election.

Daniels -- who pushed for the tax caps -- plans to ask lawmakers to approve the amendment next year rather than wait another year.

"The public wants it. The public wants a chance to vote," Daniels said. "It's really a matter of trusting the people."

But Bauer seems just as vehement that lawmakers wait. He wants to see how the caps affect communities because when property owners hit their limits, local governments and schools collect less money.

"Wait for shake-out before setting tax caps in stone" is the headline to today's Indy Star editorial:
Gov. Mitch Daniels is right when he argues that Hoosiers need a permanent fix in the state's approach to property taxes, a system that has frustrated homeowners and their elected leaders for decades.

But amending the state constitution should be done carefully and slowly to ensure that proposed changes don't give rise to unintended consequences that would be difficult to repair.

It's partly for that reason that the authors of the constitution set up a multiyear process that requires two separately elected legislatures to approve a proposed amendment before the state's voters are given a chance to voice their assent.

The proposed property tax amendment, which would make permanent a three-tiered system of caps, cleared the first stage this year, winning the General Assembly's initial approval. The measure will return for a second vote in the Statehouse in the weeks ahead and could go before voters in 2010.

Yet, the newly enacted caps are still being rolled out, with the top rate on homeowners fixed at 1.5 percent next year and set to drop to 1 percent in 2010. Eventually, the cap will rest at 2 percent for rental properties and at 3 percent for businesses.

The phase-in means that the potential consequences of the caps won't be felt fully until after the current timetable for the amendment plays out.

The fast-track scenario worries local government and business organizations, including the state Chamber of Commerce.

"Of course there's a sense of urgency from homeowners and businesses to put the caps into the constitution. Who wouldn't want to have that kind of cost savings?'' Matt Greller, executive director of the Indiana Association of Cities and Towns, told The Star's Bill Ruthhart. "But I think it's urgency without knowing the full picture.''

Which is precisely why lawmakers should be cautious about pushing the amendment onto a statewide ballot before all of the consequences are known.

Daniels acknowledges that critics have a point about waiting to gather more information, but he argues that voters should be trusted to make a sound decision about the amendment's fate.

That sounds noble. The problem, however, is that because of the phase-in voters in 2010 likely would not know the full consequences of the caps before casting their ballots.

Daniels and other supporters of the amendment are certainly correct when they point to a long history of supposed property tax solutions that were wrecked by subsequent decisions made by the General Assembly and local governments. An amendment likely will be needed at some point to secure the permanency that the governor and others want.

For now, however, it's better to wait for all the consequences of the caps to play out. Adjustments may be needed, without having to endure the prolonged process of fixing an amendment once it's grafted into the constitution.

Hoosiers are understandably fed up with high property taxes. They demanded -- and the governor and the General Assembly delivered -- a solution, one that appears fair, despite the concerns of certain business interests.

But appearances can be misleading and consequences often emerge over time.

Prudence is in order any time a change in the constitution is considered. That's especially true when addressing an issue as complex and far-reaching as property taxes.

Posted by Marcia Oddi on November 30, 2008 01:47 PM
Posted to Indiana Law