May 1, 2023
The Big Issues
LOCAL GOVERNMENT FINANCE
- HB 1454, authored by Rep. Craig Snow (R-Warsaw) and sponsored by Sen. Eric Bassler (R-Washington), is one of the largest bills of the session and includes many provisions relating to local government finance. Every year Aim tracks the language in this bill for both positive and negative impacts on municipalities. It was one of the last bills to finish and included many provisions that were added at the very end of session.
- Aim was successful in advocating for the removal of language that would have moved hospitals and related health care facilities to the 2% property tax cap category, a move that would have had significant fiscal impacts on local units. Aim also successfully supported removing language that prohibited local units from charging permit fees or other fees for work in the rights-of-way if the permittee already paid franchise fees.
- Unfortunately, language was added at the end of session to require RDCs to adopt an annual spending plan from which they cannot deviate throughout the year and language to sunset all existing food and beverage taxes in 2045 or the expiration date of their bonds.
- HB 1016, as introduced, would have automatically opted every municipal police and fire department into a merit board system if they serve a population of 10,000 or more and have at least 12 full-time staff. Both the public safety employees and the city or town council would have to vote to opt out of this provision.
- Aim worked on a compromise when the bill was being considered in Senate Pensions and Labor to require a public hearing and vote by the legislative body by October 2023 on whether to have a merit board in all of these communities. If the legislative body declined to move forward with a merit system this year, the public safety groups had the option to bring the topic up for a vote in the following year before the council.
- In the final week of session, changes were made to opt every department into a merit system if they serve a population of 20,000 or more for four years after which the council could vote to opt back out of the merit system. Aim worked to defeat this change on the floor and go back to the Senate passed compromise language but in the end the change did pass the Senate with a vote of 32-18.
RESIDENTIAL PROPERTY TAXES
- Throughout the 2023 legislative session, there were ongoing conversations about how to provide residential property owners property tax relief due to rising home prices and assessments during 2022. Changes to provide relief were included in HB 1499, SB 325, and SB 46.
- HB 1499 caps levy growth for municipalities at 4% for two years, raises the supplemental homestead deduction by 5% for two years, and updates the over 65 circuit breaker to be consistent with income limits for other over 65 benefits. It also allows counties to voluntarily provide property tax rebates in 2023. SB 325 changed the definition of a homestead following an Indiana Tax Court case. The new definition is expanded relative to the traditional definition, providing over $17M in property tax relief statewide. SB 46 allows counties to provide optional additional circuit breakers that cap property tax liability growth between 2-5% (whatever is decided locally) on all or part of the county residential properties.
- Throughout session, Aim advocated to ensure that any property tax reforms were limited and targeted and did not create long-lasting changes. While more substantial than we would have preferred, all the changes are temporary and are not as substantial for local budgets as they would have been as introduced.
- The final version of the state budget passed early on Friday morning. It included several important provisions affecting local governments that provide new funding opportunities:
- $500M for READI 2.0 that will focus on capital and infrastructure projects
- $225M in new public health funding for local public health departments
- $75M in revolving loans for residential housing development to support local infrastructure costs
- $30M for Next Level Trails
- The budget also included language to index gas taxes for road funding through 2027, changed the fee structure for SBOA audits of local governments to make the local cost share 50% of actual cost, and clarified language in the opioid settlement fund to ensure no money is diverted from local funds for state attorneys fees and diverting very small distributions to small cities and towns to county-wide programs.
- Overall, language and funding in the budget was very positive for cities and towns throughout Indiana and Aim is very appreciative of the work done by state fiscal leadership to prioritize community development.
- HB 1005, authored by Rep. Doug Miller (R-Elkhart) and Sen. Linda Rogers (R-Granger), includes Aim’s initiative to remove the restrictions on which communities can use residential TIF and removes the requirement that school boards approve residential TIF use. This bill passed the House 71-23 but language in HB 1454 ensures that the changes will only be in effect for 4 years after which time they will revert back to current law without additional legislative action.
- SB 20, authored by Sen. Liz Brown (R-Fort Wayne) and sponsored by Rep. Matt Lehman (R-Berne), allows municipalities to create outdoor refreshment areas where alcohol can be purchased, carried out, and consumed for festivals, events, or as a permanent amenity. SB 20 passed the House with a vote of 93-3 and passed the Senate with a vote of 37-11.
- SB 317, authored by Sen. Andy Zay (R-Huntington) and sponsored by Rep. Chris May (R-Bedford), allows municipalities to prepay for purchases up to $2M or 50% of the project cost. This bill passed the House 82-0 and passed the Senate 49-0.
AIM LEGISLATIVE MOMENT
“Every session is a little different and this one unique in that more of our issues came down to the final minutes of session. We had some very big-ticket items, very critical items to cities and towns, and the team did an exceptional job at navigating those to limit impact, remove impact completely, or make sure it was something positive.”
– Matt Greller, Aim CEO
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