Indy Library Projects – $58M in Bonds but no Referendum

17 Nov
Indy Public Library Central Branch

Indy Public Library Central Branch

The Indy Star had an interesting article today on a proposed plan by the Indianapolis Public Library to invest $58.5M across 11 different branches, raised by bonds and paid for via property tax levies (“$58M in bonds, no referendum? Indy library project raises questions“). The issue raised was why the $58.5M proposal would not have to go through the referendum process, which has been required for capital projects over $12M since 2008.

The answer, which is both legally correct and widely accepted, is that the Indianapolis Public Library proposal, although presented as a single coherent package, is not a single capital project. It is spread over 11 different branches, paid for by 8 different bonds spread over 6 years. In fact, it would not even be feasible to implement the proposal as a single project, as different branches would be ready for the renovations at different times.

The article pointed out, though, that while it was appropriate to consider this proposal across multiple projects, none of which reached the $12M level required for a referendum, other governmental units could theoretically attempt to subvert the referendum requirement by breaking projects down into separate pieces all of which individually fall beneath the $12M threshold but collectively would have required the referendum.

The article also discussed an example in which the City of Lebanon managed to split a $4.5M aquatic center project into smaller projects, none of which individually required that the city go through the petition and remonstrance process. Petition and remonstrance is a process that allows taxpayers to object to a capital project over $2M (and less than $12M, which requires a referendum), and results in a race between supporters and opponents of a project to get the most petition signatures.

One important consideration, which I was surprised was not mentioned in the article, is that there IS an advantage (from the perspective of units of local government) to going through a referendum: property tax levies that are approved through the referendum process are exempt from the circuit breakers (property tax caps). Debt service levies that do not go through a referendum are within the property tax circuit breakers.

You may remember that this issue had some application close to home. The 2008 general election in Monroe County included a referendum in the Richland-Bean Blossom School Corporation to raise $35M for several school building projects (the Junior High and the High School). The referendum failed. In 2009, however, the RBBSC school board passed two separate $10M bond levies, in order to make improvements to the Junior High School and the High School, separately. Each of these projects were below the $12M referendum threshold. Both added to taxpayers’ property tax bills. However, since they didn’t go through the referendum process, these bond levies were inside the property tax circuit breakers, and resulted in some circuit breaker revenue loss to all units of local government serving the Richland and Bean Blossom townships.

Note: The following memo from the Department of Local Government Finance (November 25, 2008) outlines the processes for capital projects, petition and remonstrance, and referendum.

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