Too Little Too Late? Council considers local option income tax to help ease burden: Even if tax is approved, county wouldn't feel

Braden Lammers

Oct. 23, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- The Clark County Council is considering implementing a Local Option Income Tax -- LOIT -- to help ease its budget strains.

The LOIT would, if passed, help mitigate some costs for the county including helping to fund 911 services, but the gap the council has still not figured out how to cover is staggering.

According to information presented to the council this week by Consultant Dan Eggermann, the revenues expected for 2010 will equal about $12.9 million.

The general fund budget, as it currently stands with cuts made by department heads, is $18.7 million -- $700,000 higher than the approved budget for 2009.

The gap left to be made up is about $6 million.

After going through each recommendation made by Eggermann another problem became apparent to the council.

Even if the council were to apply all of his suggestions most would not have an impact on 2010, but rather generate revenues in 2011.

The possible aids for the upcoming year, according to Eggerman, include: preparing a short and long-term capital projects plan and fund the projects through a public works loan; work with other taxing units to consolidate shared services or implement interlocal agreements; add new fees or fines for services; and implement one or more of the LOIT taxes, which consist of property tax relief, operating levy freeze and public safety.

"This is one of these recommendations we can do at this point," said Barbara Hollis, council member referring to the LOIT tax. "Some of the other things we can't implement in this time period."

"In a nutshell, one half of what would be imposed would go to lower property taxes in one form or another, the other half has to be used for public safety," she said.

The public safety portion of the LOIT proposed by the council would help fund the county's 911 emergency dispatch system.

The revenue for the service has disappeared exponentially as many county residents have moved away from landlines, instead relying exclusively on their cellular phones.

Currently, the revenue received to fund the 911 service is through a $.10 tax on landline telephones.

A secondary problem exists if Jeffersonville achieves its second-class city designation -- which would drop the rate to $.03 for the county.

"We can't fund it at 10 [cents] we certainly can't fund it at three [cents]," Hollis said.

Even if the LOIT tax is approved by the council, all of the money would not be headed to the Clark County. Other municipalities would get their share as well.

While estimates show the LOIT would bring in nearly $5 million in revenues, the county would see just $1.5 million of that -- roughly 30 percent.

As the ordinance has been drafted, the revenue raised would impose a tax of .25 percent to first fund the 911 system and then be applied to the municipalities.

"It is an indirect relief, but it definitely is a relief," said Clark County Auditor Keith Groth.

The municipalities must agree to an interlocal agreement in order for the ordinance to go into effect the way the county council has planned.

"I think we'll find a reasonable way to get it done," said Greg Fifer, attorney for the commissioners.

Other municipalities may need to enter into the agreement out of necessity.

"If they don't go along with the consolidation then they get left out of getting the information; they get left out of having the services of 911," said Sheriff Danny Rodden. "It's almost like they're going to be under the gun to do it, because the state will shut them off from getting data."

But even if the tax were to go into effect it's not going to dig the county out of the hole it finds itself in.

"We aren't going to get the full benefit of this real soon either, it's going to take time to implement" Hollis said.

For now, it's a jumping off point to address the fiscal problems.

"It's the only place that I know of for 2010 to go get a source of revenue that you don't have today to try to plug the hole and avoid layoffs and those kinds of things," Fifer said.

The ordinance imposing the new tax would need to be passed by Nov. 1, 2009, and would go into effect Dec. 1, 2009. The issue will likely be voted on at the county council's next meeting on Monday.

LOIT distribution:

County-wide rate- .25 percent.

Estimated revenue- $4,986,932.

Distribution:

Clark County- $1,510,043 (30.28 percent).

Jeffersonville- $1,899,023 (38.08 percent).

Charlestown- $209,451 (4.2 percent).

Clarksville- $1,157,966 (23.22 percent).

Borden- $17,454 (.35 percent).

Sellersburg- $185,514 (3.72 percent).

Utica- $7,481 (.15 percent).

Newstex ID: KRTB-0418-39092242