Tag Archives: COIT

2018 Local Income Tax (LIT) Numbers for Monroe County Show Strong Economic Growth

1 Aug

One of the numbers that nearly all local governments eagerly await each year before setting budgets is the amount of local income tax (LIT) it will be receiving for the ensuing year. While this information arrives in several stages of increasing refinement, the first indicator that counties receive is the estimate of local income taxes for the county as a whole for the budget year by the Indiana State Budget Agency.

Today, Indiana counties received their 2018 Certified Distribution estimates from the State Budget Agency. Here is a table summarizing these estimates and comparing them to the 2017 certified distributions for Monroe County:

Screenshot 2017-08-01 19.29.30

These numbers represent very good news for Monroe County residents. The overall increase in local income tax collections for Monroe County is 4.27%, demonstrating robust growth in the income earned by Monroe County residents.

Just as a reminder, Monroe County’s local income tax (LIT) rates are as follows:

  • Expenditure – Certified Shares: 0.9482%
  • Expenditure – Public Safety: 0.2500%
  • Expenditure – Economic Development: 0%
  • Property Tax Relief: 0.0518%
  • Special Purpose (for Monroe County, this rate is for juvenile services): 0.095%
  • Total Income Tax Rate: 1.345%

The amounts shown in the table above will be distributed to various local government units:

  • Certified shares will be distributed to all civil taxing units except Solid Waste District, which means the county, cities and towns, townships, the public library, Perry-Clear Creek Fire Protection District, and Bloomington Transit
  • Public safety will be distributed first to the Dispatch Center (in a percentage determined by the Monroe County Income Tax Council), then to township fire departments (in an amount determined by the Income Tax Council), and then among the county and the three cities and towns (Bloomington, Ellettsville, and Stinesville).
  • Property Tax Relief will be used to offset the property taxes of homestead properties
  • Special Purpose goes to juvenile services in Monroe County, which includes youth services (including the Binkley House Youth Shelter), juvenile probation, and juvenile courts

The State Budget Agency will provide updated numbers to Indiana counties before October 1.

 

 

2016 Local Income Tax Rates — How Does Monroe County Compare?

17 Mar

WestsideBack in 2014, when Monroe County was considering a small increase in the Juvenile County Option Income Tax, I ran a comparison of Monroe County with the other 91 counties on overall income tax rates (Income Tax Rates in Indiana Counties — How Does Monroe County Compare?). Now that we are starting to hear some calls from public safety agencies for a public safety local option income tax (which would be passed by the Bloomington City Council, not the County Council, incidentally), I thought I’d re-run the comparisons using 2016 local option income tax rates.

Here is a table showing the total combined local option income tax rates for 2016 for each county in Indiana, along with each county’s percentile.

Screenshot 2016-03-17 07.26.43

2016 Local Option Income Tax Rates by County

Monroe is at the 24th percentile rank, which basically means that Monroe County’s income tax rates are in (near the top of) the bottom quarter. Put differently, 76% of Indiana counties have a higher income tax rate than Monroe County.

So how do we compare to our neighbor counties?

Screenshot 2016-03-17 07.31.47

2016 LOIT Rates for Monroe County Neighbors

Monroe County currently has the lowest income tax rates of any of its neighbor counties.

Finally, how does Monroe County compare with its “peer” counties?

Screenshot 2016-03-17 07.35.43

2016 LOIT Rates for Monroe County Peer Counties

Obviously the definition of “peer” county is somewhat subjective, but these counties are ones that Monroe County is typically compared against, in terms of population, urbanization, demographics, etc.  In this comparison, we have the second-lowest income tax rates, second only to Vanderburgh County.

Data Source: Indiana Handbook of Taxes, Revenues, and Appropriations, Fiscal Year 2015

End of the Year Fiscal Update for Monroe County Government

30 Jan

At last week’s Monroe County Council work session, I gave a presentation to the council and the public on the fiscal state of Monroe County Government as of the end of 2014, particularly from the perspective of the county’s primary general operating funds — the General Fund (property tax) and the County Option Income Tax (COIT) fund (income tax), as well as the Rainy Day fund (essentially, our savings account).

In short, the county’s financial position is strong. The most important slide in the presentation was the following, which summarizes the two general funds (property tax and income tax) as well as the Rainy Day fund:

2014 General Funds Summary

Although the County had $2.2M less in cash on hand at the end of 2014 as it did in the beginning, this was due primarily to planned spending on one-time capital expenses, including $1.8M to equip the 911 Dispatch Center and $155K for the Monroe County Urbanizing Area plan. In addition, because settlement (the process by which the property tax collected by the county gets distributed to all of the taxing units that receive property tax) was not complete by the end of 2014, the county only received 95% of the property tax it should have received  for the second half of the year. The remainder will be paid in 2015.

A couple of other important findings in the report:

  • We paid out approximately $200K in expenses that did not by law require an appropriation by the Council. These expenses include special prosecutors, certain election expenses, elected official travel to certain state-mandated meetings, and State Board of Accounts audit expenses. This $200K per year number is relatively stable from year to year, so my recommendation is that the Council budget that amount per year, even though we don’t have any control over it.
  • Both general funds (property tax and income tax) end the year with healthy balances. The general property tax fund required a transfer of $2.7M from rainy day to stabilize it after several large one-time capital purchases over the last several years (Johnson Hardware Building, 911 Dispatch Center equipment, and the Monroe County Urbanizing Area plan).
  • We still have a $3.3M balance in the Rainy Day fund, which gives us a buffer in case property tax settlement continues to be delayed, or if income tax should take an unexpected nosedive.
  • County departments reverted (i.e. didn’t spend) approximately $1.3M of their appropriations in 2014. $605K of this was in personnel. Personnel reversions also appear to be quite stable from year to year. Personnel reversions generally occur because of employee turnover. When a position is vacant — even for a day —  it leaves unused personnel (salary and benefits) appropriations. Even when that position is filled, it is generally filled with someone whose salary is at the entry level for that classification — creating more reversions. The council was in general agreement that departments should transfer any of their unused personnel appropriations before requesting any additional appropriations towards the end of the year.
  • The circuit breakers (tax caps) are taking an increasing (but still not yet alarmingly large) bite out of property tax revenues in Monroe County. I have written about circuit breakers before here and here.

The last slide in the presentation summarizes the 2015 budget that the Council adopted in October:

2015 Budget Summary

As this chart shows, the budget that was passed is a balanced budget (actually, is about $122K in surplus). However, there  are a lot of things that this small surplus doesn’t take into account both good, like the additional 2014 property tax revenue that we will receive in 2015, as well as 2015 reversions, and bad, like the circuit breakers and any additional appropriations that we might have to make beyond what was budgeted for 2015.

The entire report can be found here: 2014 Budget Wrapup Presentation G McKim

2015 Income Tax Projections for Monroe County Received – 2.8% Increase

4 Aug

On August 1st, the Indiana State Budget Agency released the estimates of local option income tax collection (County Option Income Tax, or COIT) for each county, to be distributed for the 2015 budget year. The projections show Monroe County’s collections of its 1% COIT at $26,909,660, an increase of $712,539, or 2.8%, over the collections for 2014. In addition, the special Monroe County Juvenile COIT, used to fund juvenile services, is projected to jump from $1,309,856 to $2,556,418, an increase of $1,246,562, resulting from a recent hike in the Juvenile COIT rate from 0.05% to 0.095% that takes effect October 1, 2014.

Income tax is one of the primary sources of revenue to fund non-highway general operations of County Government — property tax is the other. Along with the annual “cost of living” increase in the property tax levy (2.7% for 2015, see State Releases Assessed Value Growth Quotient for Local Governments), the annual certified local option income tax collection is one of the most carefully-watched numbers in local government, since those two numbers determine to a large degree what the budgets of local units of government look like for the ensuing year.

The COIT collections are important not only because of their importance  to local governments as a source of revenue, but also because they serve as a barometer of the local economy (albeit a bit lagged). The following chart shows the overall COIT collections (not counting the Juvenile COIT) from 2008 to the current projection for 2015 in Monroe County. As the chart illustrates, our COIT, and therefore the income of local residents, has been going up relatively slowly but steadily since 2011, after a relatively sharp plummet from 2010-2011.

Monroe County Option Income Tax 2008-2015

Monroe County Option Income Tax 2008-2015

The income tax numbers that were just released are only projections; the state is required to release the official income tax certification before October 1. However, in the past the official September certifications have not differed from the August projections significantly. In fact, the income taxes to be paid out for 2015 (local units of government receive approximately equal monthly payments throughout 2015) have actually already been collected from Monroe County residents during the period of July 1, 2013-June 30, 2014.

The $26,909,660 projected for Monroe County for 2015 will be divided among all of the local units of government in Monroe County that receive COIT: Monroe County Government, the City of Bloomington, the towns of Stinesville and Ellettsville, the Monroe County Public Library, Perry Clear Creek Fire Protection District, and all of the township governments. The total income tax for Monroe County is divided up among all of these local units of government; each unit’s share — called Certified Shares — is determined roughly in proportion to each unit’s property tax levy as a fraction of the whole (with an adjustment for new debt, so that taking on debt doesn’t entitle a governmental unit to a higher proportion of the income tax). This distribution of the total COIT among the various local units of government has not yet been released.

All in all, the COIT projections are good news for local governments; although we are not seeing the sharp annual increases that we did before the recession hit, we are seeing another year of modest but steady growth. Good for the local economy, good for residents of Monroe County who, on average, are earning more, and good for the local units of government tasked with serving the local residents.

For reference, I have written about local option income taxes in Monroe County several times in the past:

Income Tax Rates in Indiana Counties – How Does Monroe County Compare?

28 Apr

As I have mentioned in previous postings, Monroe County is considering raising its income tax rate to support juvenile services from 0.05% to 0.095%. Several constituents have asked me how Monroe County’s income tax rate compares to other counties in Indiana.

First of all, there are six different types of local option income taxes available to all Indiana counties, in various combinations. They are:

  • County Option Income Tax (COIT) — Monroe County uses this, at a 1% rate
  • County Adjusted Gross Income Tax (CAGIT)
  • County Economic Development Income Tax (CEDIT)
  • Local Option Income Tax (LOIT) to freeze property tax growth
  • Local Option Income Tax (LOIT) to replace property taxes
  • Local Option Income Tax (LOIT) to support public safety

In addition, there are several special income taxes that are available through legislation specific to individual counties. Monroe County has one of these special income tax rates available for juvenile services (the so-called Juvenile COIT). We are authorized to raise the rate up to a maximum of 0.25%. The rate is currently 0.05%, and the County Council is considering raising it to 0.095%. If this passes, Monroe County’s total income tax rate would be 1.095%, up from 1.05%.

The other thing to remember about income taxes is that taxpayers pay income tax based on where they live, not where they work. So a Greene County resident who works in Monroe County, for example, would pay to Greene County an income tax rate of 1% (i.e., Monroe County would receive nothing). Incidentally, although not the topic of this posting, this system puts “employment center” counties (like Monroe, Tippecanoe, Marion, etc.) at a disadvantage relative to their neighbor counties.

So how does Monroe County’s total income tax rate stack up against other Indiana counties? The following table lists all of the counties in Indiana, along with their total income tax rate (combining all of the income taxes that the county has adopted) and their rank in the state, where 1 represents  the highest tax rate and 92 the lowest. For the purposes of this analysis, I used 1.095% for Monroe County (i.e., how we would compare IF we adopted the higher tax rate).

 

County  Income Tax Rate Rank
Pulaski County         3.130 1
Jasper County         2.964 2
Wabash County         2.900 3
Morgan County         2.720 4
Miami County         2.540 5
Cass County         2.500 6
Jay County         2.450 7
Fayette County         2.370 8
Parke County         2.300 9
Clay County         2.250 10
Grant County         2.250 10
Brown County         2.200 12
Warren County         2.120 13
Montgomery County         2.100 14
Wells County         2.100 14
Clark County         2.000 16
Clinton County         2.000 16
Washington County         2.000 16
Fulton County         1.930 19
Benton County         1.790 20
Steuben County         1.790 20
Daviess County         1.750 22
Huntington County         1.750 22
Lawrence County         1.750 22
Madison County         1.750 22
St. Joseph County         1.750 22
Starke County         1.710 27
Carroll County         1.704 28
Hancock County         1.650 29
Marion County         1.620 30
Howard County         1.600 31
Jackson County         1.600 31
Tipton County         1.580 33
Perry County         1.560 34
DeKalb County         1.500 35
Elkhart County         1.500 35
Lake County         1.500 35
Martin County         1.500 35
Noble County         1.500 35
Putnam County         1.500 35
Randolph County         1.500 35
Rush County         1.500 35
Union County         1.500 35
Wayne County         1.500 35
Scott County         1.410 45
Hendricks County         1.400 46
LaGrange County         1.400 46
Ripley County         1.380 48
Blackford County         1.360 49
Allen County         1.350 50
Decatur County         1.330 51
White County         1.320 52
Owen County         1.300 53
Bartholomew County         1.250 54
Franklin County         1.250 54
Henry County         1.250 54
Jennings County         1.250 54
Marshall County         1.250 54
Orange County         1.250 54
Shelby County         1.250 54
Vigo County         1.250 54
Whitley County         1.233 62
Floyd County         1.150 63
Adams County         1.124 64
Fountain County         1.100 65
Knox County         1.100 65
Tippecanoe County         1.100 65
Monroe County (*)         1.095 68
Delaware County         1.050 69
Boone County         1.000 70
Crawford County         1.000 70
Dubois County         1.000 70
Greene County         1.000 70
Hamilton County         1.000 70
Harrison County         1.000 70
Johnson County         1.000 70
Kosciusko County         1.000 70
Newton County         1.000 70
Ohio County         1.000 70
Posey County         1.000 70
Switzerland County         1.000 70
Vanderburgh County         1.000 70
LaPorte County         0.950 83
Spencer County         0.800 84
Dearborn County         0.600 85
Gibson County         0.500 86
Porter County         0.500 86
Warrick County         0.500 86
Pike County         0.400 89
Jefferson County         0.350 90
Sullivan County         0.300 91
Vermillion County         0.200 92

Pulaski County has the highest income tax rate in the state, at 3.13%, while Vermillion County, at 0.2% has the lowest. Monroe County’s rank is 68th.

So we are in the lower third of counties in Indiana for income tax rates. How do we compare to our neighbor and peer counties, though?

The following chart shows the 2014 income tax rates and rankings among Monroe County and its contiguous neighbors:

NeighborCountyTaxRates2014

Monroe County has the second lowest income tax rate of its neighbor counties.

Now how about our peer counties? Peer counties are counties that are generally similar to Monroe County in size and demographics (i.e., college towns, rural-urban breakdown, etc.). These counties are typically used in policy comparisons.

The following chart shows the 2014 income tax rates and rankings for Monroe County along with its peer counties.

PeerCountyTaxRates2014

If the proposed juvenile tax increase passes, we will be third-lowest of our peer counties. Currently we are actually tied with Delaware for second-lowest.

The final comment to make about local income taxes is that unlike property taxes, there is no guarantee that, despite the rates, the amount of tax actually collected will grow or remain stable over time. The amount of tax revenue for local governments is directly tied to the amount of income actually earned by county residents. and thus the overall economic development of the county.

 

 

The Phantom Council and Personal Property Taxes

1 Feb

There is a lot of attention  during this session of the Indiana General Assembly on personal property taxes (i.e., taxes on business equipment), spurred by a call from Governor Pence for their elimination. I’ll talk about the impact of the Governor’s proposal, as well as several of the bills in the Indiana General Assembly, on local governments in a separate post. My purpose here is to talk about a little-known institution called the County Income Tax Council — a body that has been referred to as the “phantom council.”

The connection is that one of the primary legislative vehicles for reduction or elimination of the personal property tax is House Bill 1001, which gives counties the option of eliminating personal property taxes on newly acquired personal property. This option, at least in the version of the legislation on the floor as of today, is exercised, not by the County Council, which normally exercises fiscal authority over county-wide taxation, but instead by the County Income Tax Council.

What is the County Income Tax Council?

The County Income Tax Council is a body created by statute (IC 6-3.5-6-2) for each county in Indiana to exercise oversight over the County Option Income Tax (COIT), one of 6 local income taxes allowed by Indiana statute. Its statutory duties and powers are: to impose or rescind the county option income tax, increase, freeze, or decrease the tax rate, and increase the COIT homestead credit for the county.  The County Income Tax Council also has some powers with respect to the wheel and vehicle excise taxes. And now — the General Assembly is proposing to give this body the power to eliminate personal property taxes on newly acquired personal property. For reasons I will explain below, this is highly problematic — in fact, the whole existence of the County Income Tax Council is problematic.

In keeping with the monicker “the phantom council”, the County Income Tax Council is not a regular deliberative body with individual members. Instead, it is  a “virtual council” that rarely, if ever meets. It is defined by statute as follows:

Every county income tax council has a total of one hundred (100) votes. Every member of the county income tax council is allocated a percentage of the total one hundred (100) votes that may be cast. The percentage that a city or town is allocated for a year equals the same percentage that the population of the city or town bears to the population of the county. The percentage that the county is allocated for a year equals the same percentage that the population of all areas in the county not located in a city or town bears to the population of the county. On or before January 1 of each year, the county auditor shall certify to each member of the county income tax council the number of votes, rounded to the nearest one hundredth (0.01), it has for that year. (IC 6-3.5-6-3)

In other words, this council is made up not of individuals, but of fiscal bodies of other units of government.

How Does This Play Out in Monroe County?

In Monroe County, the county income tax council is thereby made up of the fiscal bodies of the county (the Monroe County Council) and the fiscal bodies of each of the municipalities in the county — the Bloomington City Council, the Ellettsville Town Council, and the Stinesville Town Council.  As described above, the votes are allocated amongst these bodies in proportion to their populations (and the county is given the population only of the unincorporated areas). For 2014, this means that each body gets the following “votes” in the phantom council:

  • Monroe County Council: 36 votes
  • Bloomington City Council: 59 votes
  • Ellettsville Town Council: 5 votes
  • Stinesville Town Council: 0 votes

All votes are cast by the body as a whole — in other words, all of the Bloomington City Council votes as a single bloc, Monroe County Council as a single bloc, etc.

Taxation Without Representation?

The important thing to notice about this breakdown is that the Bloomington City Council has an absolute majority on the County Income Tax Council. This is generally going to be the case in any county that has a single large municipality. In other words, it doesn’t matter what the County or Ellettsville or Stinesville say — the Bloomington City Council has the power to set income tax policy for the entire county. This raises a serious issue of representation. While every resident of Monroe County, including all residents of cities and towns, are represented by 4 (out of 7) members of the Monroe County Council (1 district and 3 at-large members), there are many residents of Monroe County — in fact, all residents outside of the City of Bloomington corporate limits — who are not represented by any City Council member.

Taking this argument one step further, because elimination of the personal property tax doesn’t simply reduce tax revenue — it actually shifts the tax burden to other property owners (i.e. raises the taxes of homeowners, to the benefit of businesses), we are actually faced with a situation in which a city council could vote to raise the taxes on residents who have NO representation on that council. This is a loophole that needs to be eliminated.

When Does the Income Tax Council Meet?

 So when does the Monroe County Income Tax Council — controlled by the Bloomington City Council — meet? In practice — never. The statute (IC 6-3.5-6-13.5) states that “A county income tax council must [emphasis mine] before August 1 of each odd-numbered year hold at least one (1) public meeting at which the county income tax council discusses whether the county option income tax rate under this chapter should be adjusted.” However, at least in the time that I have served on the County Council (since 2009) there has definitely not been a meeting of the Income Tax Council, and I believe that there has not been a meeting quite a bit before that. In fact, the most recent evidence I can find of a vote of any kind from the Income Tax Council is from 1995 (interestingly, in the form of a vote from the Bloomington City Council, then presided over by current Monroe County Commissioner Iris Kiesling). This lack of meeting, despite statute saying that the council “must” hold a public meeting on odd-numbered years, is similar to the experience of officials in other counties I’ve spoke with about the matter, and bolsters the notion of the income tax council as a “phantom council.”

What, Then?

 Most broadly, the county income tax council needs to be eliminated. The current situation allows, in some situations,county tax policy to be dictated by municipal councils who don’t represent the entire county. The obvious broader fix is simply to replace the county income tax council with the county council — the county fiscal body that is already empowered with oversight of all other countywide fiscal policy. As I mentioned above, the county council already represents all residents of the county, including those in cities and towns. The converse is not true. There is actually a bill this session, Senate Bill 258, that replaces the county income tax council with the county council; however, it doesn’t appear to be going anywhere this year.

Even if the General Assembly can’t find its way to close this loophole this session, it should still at least amend HB1001, which looks likely with a republican supermajority to pass in some form, to give the ability to opt out of personal property taxes, to the county council — the county’s fiscal body representing all county residents — rather than the phantom council.

2013 COIT Distributions Available

17 Sep

Each fall, usually just before or during budget hearings, the Indiana Department of Local Government Finance (DLGF) announces the distribution of income tax revenues for the following year to each unit of local government in the County. This week, the COIT distributions for 2013 were released (the report for all units of government in the state is available here). These are income tax receipts that were collected between July 2011 and June 2012 by the state, and will then be distributed to each unit of government in Monroe County over 12 approximately equal monthly payments in 2013.

The page that shows these distributions is available here: Monroe County 2013 COIT Distribution.

Income taxes are collected at-large from individuals (not corporations — there is no local corporate tax in Indiana), and are then distributed to local units of government (the county, the three incorporated cities and towns, townships, the public library, Bloomington Transit, and the Perry Clear Creek Fire Protection District. The distribution to each local unit is based on a formula that roughly corresponds to the relative property tax footprint of the unit of government. What is interesting about this method of allocation is that it doesn’t matter where within the county a taxpayer lives — his or her income tax goes into a big pool and is distributed via the aforementioned formula. So a taxpayer in Polk Township could theoretically see his income taxes support the City of Bloomington, and a resident of Ellettsville could see her income taxes support the Perry Clear Creek Fire Protection District, etc.

For now, here are the COIT distributions for Monroe County for 2013.  Tomorrow I’ll provide some additional comparisons to past years,  and some interpretation of what the numbers mean.

Unit Name 2013 2013 %
Monroe County  $9,663,002 40.1%
Bean Blossom Township  $37,378 0.2%
Benton Township  $51,404 0.2%
Bloomington Township  $403,439 1.7%
Clear Creek Township  $61,958 0.3%
Indian Creek Township  $23,879 0.1%
Perry Township  $187,840 0.8%
Polk Township  $15,561 0.1%
Richland Township  $219,758 0.9%
Salt Creek Township  $19,556 0.1%
Van Buren Township  $418,035 1.7%
Washington Township  $23,625 0.1%
Bloomington Civil City  $9,440,104 39.1%
Ellettsville Civil Town  $567,758 2.4%
Stinesvill Civil Town  $2,718 0.0%
Monroe County Public Library  $2,075,631 8.6%
Bloomington Transportation  $389,105 1.6%
Perry-Clear Creek Fire Protection  $515,177 2.1%
Total  $24,115,928

This means that Monroe County Government, for example, will receive $9,663,002 in income tax over 2013, in 12 approximately equal monthly payments. This is greater than we had been projecting based on past experiences. I will explain why the change in a future blog posting. But in any case, it is very good news for those of us who have to pass a budget for Monroe County Government for 2013!