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11/16/2009 9:19:00 AM
Some Indiana mayors want legislature to examine who should be exempt from property taxes

Daily Journal of Johnson County

By Joseph S. Pete, Daily Journal of Johnson County staff writer

A group of Indiana mayors want state lawmakers to look at whether church-owned retirement communities and other properties owned by nonprofit groups should be tax-exempt.

The mayors of Indiana's 30 largest cities would like the legislature to review whether to charge property taxes to some nonprofit groups, consider allowing cities to impose new user taxes, and send more road money to cities with wider, more heavily trafficked streets.

Such changes would give cities more control and more money for roads and other infrastructure needs as property tax dollars decline, Greenwood Mayor Charles Henderson said.

A major goal will be to ask state lawmakers to look at who isn't paying property taxes, why, and if the exemptions are needed, Henderson said.

The mayors want the state to review exemptions for retirement homes, church-owned lifestyle centers, hospitals, private colleges and other nonprofit agencies, he said.

Requiring nonprofit agencies to pay taxes on certain types of property would send more tax dollars to cities but would mean higher costs for seniors in retirement homes, hospital patients and churches, officials said. Cities could, for example, tax church-owned lifestyle centers, but churches say those buildings are an essential part of their ministry.

State lawmakers would have to closely scrutinize any proposals the mayors put forth, and it is unlikely they would accept any new taxes in this economic climate, said State Rep. Woody Burton, R-Greenwood.

The group of mayors, which includes Henderson, came together this month largely because of concerns about funding in the wake of the state's property tax reforms. The group recently met for the first time in Greenwood.

Fort Wayne Mayor Tom Henry helped organize the group, which aims to represent the interests of Indiana's largest cities at the statehouse next year.

The Indiana Association of Cities and Towns already represents local governments throughout the state and has its own legislative agenda. But the mayors wanted to launch an independent lobbying campaign that focused more on the needs of large cities that are struggling with a drop-off in tax dollars, Henderson said.

After meeting in Greenwood, Henderson said the mayors settled on three main goals:

• Encourage the legislature to revisit which properties owned by nonprofits should be exempt from property taxes since the new property tax caps will mean a decline in money to cities.

• Allow cities to impose their own user taxes such as sales, innkeeper's, and food and beverage taxes to raise money for economic development projects, such as aquatic centers.

• Change the method by which the state distributes gas tax and other road money so that cities get money based on lane miles. Currently, the state uses the standard of road miles, which means cities get as much money for a five-lane street as they do for a two-lane one.

The mayors discussed an extensive wish list but narrowed it to those three goals, said Kumar Menon, Fort Wayne's city utilities director. The legislature will have a short session next year, and the mayors want to have a focused and effective lobbying campaign.

They hope to introduce the proposals and get studies started but not necessarily put forward any bills in what's expected to be a brief session, Menon said.

Tax exemptions

Cities across the state are receiving less in property taxes because of caps that have been phased in and will go down to 1 percent for homeowners next year, Henderson said. To make up for that loss, the mayors want the legislature to look at whether some properties should be tax-exempt, such as retirement communities and church-owned gyms, Henderson said.

"At one time, only churches were exempt, and this was it," he said. "But in this day and age, there's a lot more that's not on the tax rolls, like retirement communities and some of these other things that are owned by churches but that aren't a place of worship."

At this point, the mayors group is not asking that any particular nonprofits be required to pay property taxes, only that lawmakers take a new look at who should pay taxes and who shouldn't. Greenwood employees and other city employees across the state are putting together a tally of how much property in their cities isn't taxed, so the mayors can put forward a more concrete proposal.

Greenwood Village South Retirement Community, for instance, owns more than 40 acres on U.S. 31 in Greenwood with towers and homes valued at more than $10 million. Greenwood Christian Church owns $5.5 million worth of property, including a gymnasium, on Averitt Road.

Church-owned gym lifestyle centers should not be taxed because they are a part of a church's ministry and community outreach, said Joyce Long, marketing director with Mount Pleasant Christian Church in the Center Grove area.

"Our life center may be in a different building across the street, but it's vital to our ministry," she said. "We conduct our student ministry and classes in that building. It's a part of our church and a part of our ministry, so we don't feel that taxes would be appropriate."

Taxing nonprofit agencies such as hospitals has come up before, but it raises the question of how a community wants to allocate its resources, said Bill Oakes, a spokesman for Johnson Memorial Hospital.

Nonprofit hospitals such as Johnson Memorial invest all the money they make in increasing access to health care, and taxes would be a cost that would be passed on to patients, Oakes said. The hospital also has a mandate to provide medical care to anyone, regardless of their ability to pay, and has given the community $14 million in unreimbursed medical services this year.

The hospital already pays property taxes on offices it leases out but not on facilities used to provide general care to anyone, Oakes said.

New taxes would make it harder for the hospital to find the money to offer such care, especially at a time when the state cut its Medicaid reimbursement rate by 5 percent, Oakes said. As a county-owned hospital, the facility belongs to the public and could impose a tax of its own if it couldn't bring in enough money to be self-sustaining.

State lawmakers could review who gets tax exemptions, but cities should focus on cutting spending when times are tough instead of trying to get more money, Burton said.

The state's tax collection fell $46 million below projections last month, and everyone has to make cuts, he said.

Many of the tax-exemptions are needed, such as for retirement communities, Burton said. Those communities receive little government money and would have to pass the tax burden on to their residents, who often are on fixed incomes. Revoking the tax exemptions would amount to a tax hike on seniors, he said.

State lawmakers have worked to prevent groups from taking advantage of tax exemptions, such as a Utah church that bought land all over the country to farm, Burton said. But they could study who gets tax exemptions and if they're deserved, since cities are having a tough time financially.

Economic development

The mayors also want to ask state lawmakers to allow cities to impose their own user taxes, which would be used to raise money for economic development projects, Menon said. Such a move would give cities more local control and the ability to help attract new businesses, investment and jobs, he said.

For instance, cities could impose their own sales, innkeeper's and food and beverage taxes, Henderson said. Currently, only county governments can raise such taxes.

Many mayors believe that the sales tax should not be raised any higher than what it is now, Henderson said. But they want new city tax rates to be explored, so that cities can raise money for economic development projects such as convention centers and aquatic centers.

New sources of funding would shift the tax burden away from homeowners, while allowing cities to do projects that would make them economically competitive, he said.

Lawmakers are not likely to accept any new tax in this economic climate, Burton said. And city user taxes could hurt county governments, which also are strapped for cash because of the economy.

"We want local governments to have autonomy and the funding they need, but they need to tighten their belts in this economy," he said. "A lot of people will come to the legislature asking for money this year, but there just isn't the money until things turn around."

Road funding

The proposal most likely to gain ground with state lawmakers concerns how gas, motor vehicle excise tax and other road money is distributed, Burton said.

The mayors hope the state will use a new formula for distributing street money that isn't based on how many miles of roads are in a city. A five-lane road costs more to maintain than a two-lane one, so the mayors hope that the state will distribute the money based on lane miles.

A four-lane street, for example, would count for twice as many miles as a two-lane road, meaning the city would get more money to make repairs. Such a formula would be more fair because wider roads are more heavily trafficked and have higher maintenance costs, Henderson said.

That idea is worth exploring, but any change to the formula shouldn't mean that small towns and rural areas won't get as much money to fix their roads, Burton said. Mayors of large cities have more residents to provide services to, but the residents of rural areas still deserve to have streets in good repair, he said.

Related Stories:
• Business interests expect tax issues to vex Indiana General Assembly
• Property tax-cap issue could dominate next Indiana Legislature
• Cash-strapped mayors may try to tap owners of tax-exempt property
• State legislators return to Statehouse with reform on their minds
• EDITORIAL: More study needed on property tax caps
• Leery Indiana House Democrats move forward on property tax caps






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