INDIANAPOLIS — Hundreds of Indiana companies may be forced to accept payment for services that does not cover the cost of doing business simply because the customer is a local governmental entity.

The Republican-controlled House voted 69-26 Tuesday to prohibit local governments from spending more than $250 on any public notice advertisement in a newspaper, regardless of the actual cost of the ad or the paper's usual rates.

State law already requires newspapers charge local governments "the lowest classified advertising rate" for public notice ads, and to provide any discounts that are available to other advertisers who regularly purchase a similar amount of ad space.

But state Rep. Wendy McNamara, R-Evansville, believes newspapers are gouging local governments on public notice ads, so she said a $250 cap would ensure taxpayers are not subsidizing newspaper companies through the mandatory publications.

Under the plan, if the cost of a public notice ad exceeds $250, the local government could instead post the text of the ad on its website to satisfy the budget, contracting, purchasing and other transparency requirements in state law.

"It is one of the biggest taxpayer-friendly bills you will find this year," said McNamara, whose House-approved plan to eliminate publication of sheriff's sale notices last month was defeated in a Senate committee.

State Rep. David Wolkins, R-Warsaw, insisted that the measure is not the state dictating what private businesses can charge for their services.

"We're simply putting a limit on what local units of government can spend," Wolkins said.

That did not convince state Rep. Bruce Borders, R-Jasonville, who suggested that newspapers throughout the state will be "squashed down," since the $250 cap doesn't even cover what McNamara identified as the $262 average cost of a public notice ad.

"One of the things I completely disagree with is that this is taxpayer unfriendly," Borders said. "In fact, one of the most friendly things you can do on behalf of the taxpayers is to let them know how you're going to spend their money."

State Rep. Terri Austin, D-Anderson, proposed amending Senate Bill 535 Monday to eliminate the $250 cap and keep public notice advertising as it is. The amendment was defeated 54-39.

"We don't tell civil engineers how much they can charge when they put a proposal together to build a bridge or a road. It's publicly bid. And people know it's publicly bid because a lot of times those bids are in the newspaper," Austin said.

"I don't think we ought to take a swipe at our newspaper industry...because those are the folks who promote your chicken and noodle dinners, who promote your Little League teams, your local basketball and football teams. They're the folks who help keep your community alive so people know what's going on."

"If we take out a part of their business model, regardless of whether we think they're charging too much or not, we're all going to end up paying the price in the end because people will have less information."

The amended legislation now returns to the Senate, which could scrap the public notice cap because it's not germane to the underlying measure that limits the ability of cities and towns to regulate conduct or property use outside their municipal boundaries.

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