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If the City Council adopts an income tax increase of 0.5 percent, city officials estimate a county resident who makes $50,000 a year and lives in a $100,000 home would pay about $250 more in income taxes but about $125 less in property taxes.
Someone making $100,000 a year and living in a $200,000 home would pay $500 more a year but likely not receive property tax relief because of property tax caps.

City wisely plots path on finances

The idea that city officials face a choice between cutting services or increasing revenue is impractical and oversimplifies the significant financial problems looming in 2014. The city should – and most likely will – do both.

The administration of Mayor Tom Henry – and at least some City Council members – are on a responsible course to maintain city services with the least possible pain to residents. Yes, residents will feel a local tax increase of one-half of 1 percent. Half of the revenue would go to police and fire costs, the other half toward property tax reductions.

Granted, owners of higher-priced properties that have hit the property tax caps probably won’t see their property tax bill go down. But those with lower-priced homes – usually people who need the money the most – should see lower property tax bills.

Plus, an income tax is by its very nature a tax based on ability to pay. A little less reliance on property taxes would be good for a city budget largely constrained by property tax caps.

Non-profit agencies that now pay no property taxes will also pay a little more – about $6.50 per month – on City Utilities bills to move the cost of maintaining fire hydrants from property taxes. The cost to homeowners would be about $2.50 a month.

But the higher tax will not by itself address the 2014 shortfall, expected to be $11.2 million without cuts or revenue increases. Henry plans to seek $5 million in budget cuts.

City officials are well aware that city employees have comparatively lush benefits and will be expected to accept changes in the generous accumulation of sick time, primary insurance for spouses and other benefits.

“We all have to give up a little bit,” Henry said, with slightly higher taxes for many residents and slightly lower benefits for the city’s 1,800 workers.

To balance the budget purely by cuts would be at a greater cost than many residents want to incur. Residents likely would not – and should not – tolerate reductions in a police force and a fire department that are already short-handed.

Credit Henry for anticipating the 2014 shortfall a year ago and forming a committee composed of fiscal policy experts, businesses and community leaders, and four of the nine City Council members (three Republicans and one Democrat). Findings and options the Fiscal Policy Group reached were not knee-jerk reactions but well-researched, bipartisan and reality-based facts and alternatives.

In the years since property tax caps began, Indiana has seen several local governments caught off guard by their budget implications and forced to make drastic, noticeable and very unpopular cuts in services. Fort Wayne officials – and the county auditor’s office – have consistently researched the immediate and future implications of state policy regarding local finances and planned accordingly. Residents and taxpayers have benefited.

The council has yet to vote on the proposals. A vote on the income tax will likely come by June 30, before the city budget is set. Regardless of what the City Council ultimately decides, officials are being given sufficient notice to look at the proposals and offer opinions.