INDIANAPOLIS — A bill allowing the appointment of an emergency manager to right a cash-strapped local government’s finances passed a Senate committee on Tuesday.

The bill authored by state Sen. Ed Charbonneau, R-Valparaiso, sets up a five-member board that local governments, including school districts, can voluntarily petition for help. The emergency manager would step in if the board determines the local government is distressed and can’t meet its financial obligations.

A version of the bill died last session, but Charbonneau reintroduced the concept after removing the option of a distressed unit filing bankruptcy. Charbonneau told the Senate Committee on Tax and Fiscal Policy that bankruptcy provision “hijacked” last year’s bill.

“The focus became the end point where no one wanted to get to,” Charbonneau said, “and totally lost sight of the fact what we were trying to do is create a process for local units of government that were in fiscal crisis.”

The committee first voted to amend Senate Bill 355 to add school districts and expand its membership from three to five members before passing it to the full Senate 8-1. State Sen. Lonnie Randolph, D-East Chicago, voted against the bill over concerns with the emergency manager’s authorities.

The bill reconstitutes the Indiana Distressed Unit Appeals Board, which no longer can give relief from the state’s property tax caps. The DUAB raised Gary’s tax caps for the third and final time last year. The decision allowed Gary to collect an extra $10.8 million in taxes.

The bill requires the distressed unit that requested the help to pay for the emergency manager and gives the manager broad authority to oversee the unit’s finances, including the ability to renegotiate labor contracts and reduce or suspend employees’ salaries.

The emergency manager who the board appoints depends on the situation, Charbonneau said.

“It would depend I think a lot on the factual situation whether or not you’re going into a school, whether it’s a county, whether it’s a town and that’s the reason why the qualifications aren’t in (the bill,)” Charbonneau said. “Certainly we’re going to want to have a manager in there who understands finance. I think that’s part of the judgment the five-member board has to exercise.”

State Sen. Mike Delph, R-Carmel, asked whether the bill should include penalties for elected officials that didn’t properly manage finances.

“We are basically shifting the decision-making, the tough decision-making, over to unelected officials to go into a distressed area and try to turn finances around,” Delph said. “Arguably, it lets locally elected officials off the hook from making tough decisions.”

Charbonneau doesn’t want penalties added to the bill maintaining it would take courage for a local government to ask for help.

“The smarts to say, we need help … this is voluntary not mandatory,” Charbonneau said. “So if someone or some local unit of government is willing to step forward and say we need help I think we are all best served, the taxpayers of Indiana, to get someone in there and get the situation corrected.”

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