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Council considers raising income taxes

Fort Wayne City Council members are officially considering raising income taxes on Allen County residents, but made the move Tuesday night only after they heard a presentation from two members on why the tax isn't needed.

The council voted unanimously to introduce the two ordinances, one of which would raise income taxes 0.25 percent to pay for public safety and another 0.25 percent for property tax relief and another ordinance that would simply raise them 0.5 percent for property tax relief.

Council members could choose one or reject both after a courtesy public hearing next week, two legal public hearings in mid-June and an expected vote June 25.

They also introduced a bill to impose a new property tax, called a cumulative capital development tax. That, too, would have public hearings in mid-June and a likely vote June 25.

The new taxes, along with proposals to curtail city employees' sick time benefits, reduce overtime expenses, remove health care from union negotiations and require working spouses to take other health insurance when available, are part of the city administration's efforts to close what it estimates is an $11 million budget gap expected in 2014.

But Russ Jehl, R-2nd, and Mitch Harper, R-4th, say those cuts, along with other streams of revenue, could close the gap without imposing income taxes.

"The income tax is a nuclear option that should be the option of last resort only," Jehl said.

Instead, Jehl said, the city could raise property taxes by the $6.2 million the council has rebuffed in the past, use $2.8 million in un-obligated Community Economic Development Income Tax money and recognize that $500,000 in vehicle leases are expiring to turn what he believes to be a $6.5 million shortfall into a $900,000 surplus.

In addition, he said, there is new state funding for roads, there could be income from annexing new territory, interest from the Legacy Fund and an expected increase in the amount City Utilities pays the city's General Fund in lieu of property taxes to create $6.6 million in new revenue.

Combined with the $5 million in savings the administration has proposed, and by slowing debt payments, the city could have almost $10 million for badly needed firefighters and police officers, fire trucks, road work and park maintenance and still have a comfortable operating margin, he said.

"We reject the idea that the short-term need for cash requires a permanent (Local Option Income Tax)," Jehl said.

Harper pointed out that, though the administration isn't talking about it, there are likely to be sewer rate hikes proposed soon to pay for work to prevent sewage overflows into the rivers.

"We should know that before we impose an additional tax on people's take-home pay," Harper said.

John Crawford, R-at large, praised the presentation but warned that the details will have to be studied. Using interest from the Legacy Fund, for example, will require the mayor's approval, as would using Community Economic Development Income Tax money.