‘Big challenge’ with tax cuts

Centerville councilors received some grim news from a financial adviser about upcoming cuts to the town’s tax revenue, and that community isn’t alone.

“We want to continue the same quality of life or better, and that’s going to be a big challenge,” said Council President Dan Wandersee at the end of the presentation.

Paige Sansone, Baker Tilly Advisory Group LP principal, told council that Indiana’s tax restructuring is expected to reduce some of Centerville’s incoming funds. Legislation passed by the Republican-controlled Indiana General Assembly reduces funds coming to local communities in the name of reducing taxes for individual homeowners. 

Property tax losses are going to get “bigger and bigger and bigger” as they’re phased in, she said. For instance, Centerville is expected to lose $16,882 next year in property tax levies.

One significant change she noted is that Indiana’s local income tax expires at the end of 2027. Communities won’t get the shares of economic development taxes they’re used to receiving.

In its place will be a new structure that county governments could choose to adopt, but none of those funds automatically go to towns that are Centerville’s size.

Small towns would have to request a 25% share from their county governments, if their counties choose to adopt the maximum county services rate and the municipal local income tax for populations less than 3,500.

Sansone said state lawmakers said they intended to give property tax relief through restructuring homestead property tax deductions and credits, but it’s yet to be seen how much relief will be provided. While taxable value is going down, tax rates likely will increase, she said.

Agricultural, non-homestead residential and long-term care facilities property assessment deductions will increase from 0 to 33.4% by 2031. The agricultural land base rate changed and is anticipated to decrease land’s assessed value.

This year in Centerville, ag, non-homestead and long-term care made up nearly 36% of the town’s properties.

Homesteads are 46.9% of Centerville’s land, while commercial/industrial is 14.2% and business personal property is 3.3%.

Another change is that exemptions will increase from $80,000 on business personal property to $2 million in 2027.

State lawmakers also previously limited how much property tax growth towns have been able to receive in recent years, Sansone said.

One bright spot might be a change in road funding.

Centerville now has to provide a 25% match for Community Crossings funds if its applications for paving and sidewalk projects are successful. In the future, that match would be lowered to 20%.

However, Centerville isn’t large enough to implement a wheel tax. That option is only available to counties as well as towns with populations above 5,000.

What to do?

In response to the cuts, many Indiana communities are expecting to scale back services provided to residents. Fiscal sustainability planning includes four options, Sansone noted: revenue enhancements, expenditure control and cost shifts, service delivery changes, and service level reductions.

Sansone noted several ways communities could enhance their revenue, such as requesting special legislation to implement a food and beverage tax, reestablishing cumulative capital development funds to the maximum rate (which Centerville already does), seeking payments in lieu of taxes from utilities, reviewing charges for services and user fees, encouraging economic development, hosting festivals, sporting events and cultural activities to generate revenue, and leasing buildings, land or equipment to private entities.

Cost-cutting ideas include consolidating with townships, eliminating vacant positions, collaborating with other communities for services such as waste management, emergency services and public transit, investing in energy-efficient technologies, using volunteers for park maintenance or events, and outsourcing functions such as janitorial, payroll and information technology. 

Misty Hollis, county councilor, attended the presentation and said she doesn’t like the changes because they take away local control. Despite Hollis’ efforts to talk with lawmakers during the legislative session and explain the potential local impact, they didn’t see it her way, she said.

Hollis said county officials are already concerned about these upcoming cuts, and they have begun a hiring freeze because the county needs to cut $1.2 million going into 2027.

She encouraged Centerville councilors and other officials to attend Wayne County Area Chamber of Commerce’s meeting including all levels of elected officials in early August to bring everyone together to hear the same information about potential impacts and discuss ways to improve communication and collaboration.

Council’s work session will take place at 7 p.m. Tuesday, July 29, at the town hall, 220 E. Main St., Centerville. The public may attend.