$3 M oversight = no tax reduction
Whether it’s said that property taxes increased or that they were not reduced, the end result is that Harrison County residents are faced with a higher property tax bill this year after an accounting oversight.
The Harrison County Council has used riverboat revenue annually to reduce the property tax rate beginning with taxes payable in 2002. The council has done this by giving the money to the county’s three public school corporations to be applied to debt service.
The payments are made in proportion to each school system’s enrollment in an effort to make tax relief equitable for all the county’s taxpayers. It’s a way of using an existing accounting system to give breaks proportional to property value.
‘It’s got nothing to do with education. It’s got nothing to do with giving an equal amount to each school corporation,’ said council chair Gary Davis.
During the last two years, the Indiana Dept. of Local Government Finance applied the revenue sharing money to school revenue and adjusted the rate as a courtesy. This year, however, it did not, and no one noticed until it was too late.
The result of the overlooked $3 million was a lost savings of between 21 and 22 cents per $100 of assessed valuation for Harrison County property-tax payers.
Davis asked the three superintendents to attend Monday night’s council meeting because ‘I wanted them to be here while we discussed this topic.’
After a brief introduction, Davis said, ‘The first question I have is what each school corporation has actually done with this money, and if it will be available for reduction in 2005.’
Dr. Neyland Clark of South Harrison and Dr. Phil Partenheimer of Lanesville said the money is still in their corporation’s debt service account. North Harrison’s Monty Schneider said he used the money to reduce the amount he had to borrow to sustain North Harrison while awaiting delayed state funding.
All three superintendents said the money would be available for debt service reduction in 2005 as it should have been this year.
The superintendents and Davis said the blame fell on many shoulders. Davis said the rates had been approved and statements mailed and there was nothing that could be done to rectify the oversight during this tax cycle.
Audience members Andrew Best, Delores Eveslage and Max Fessel said their tax bills were significantly higher and expressed dissatisfaction with the lack of action.
So did Councilman Carl (Buck) Mathes.
During a 15-minute recess, Davis and the superintendents spoke apologetically with one another about the situation, and then the superintendents left. Afterward, Mathes made a motion that the corporations be required to pay back the money with interest.
The motion was seconded by Alvin Brown but failed 2-4.
Yesterday morning, Schneider and Partenheimer said that had such a motion passed, the corporations would have been powerless to comply with it, and, besides, it would be unlawful.
‘The State Board of Accounts would not allow us to pay any money back even if we wanted to pay it back,’ said Partenheimer. ‘If we were able to pay it back, we couldn’t go back to the taxpayers retroactively to make up for the money we had lost.’
Partenheimer said the revenue loss would result in the corporations’ defaulting on loans.
All the rates had been approved by the taxpayers and state without the debt service reduction, he added. Taxpayers are afforded the opportunity to vote against any project of more than $2 million which will impact the tax rate, and the corporation’s rate requests are reviewed, adjusted and approved by the state.
It was after the state had returned those figures that the corporations had about seven days in which to identify and correct the debt service oversight.
‘Technically, the schools were the last person that could catch that, although there were six or eight people in the interim who could’ve done something,’ Schneider said.
It’s common practice for the corporations to advertise their tax rates much higher than their anticipated needs. The reasoning is that it’s better to be high than low because the rate can always be lowered after approval, but it cannot be increased.
‘The state tells us, ‘This is what you are going to be approved. You need to go ahead and make your cuts and get them back to us.’ The process has always been very focused on where your cuts are,’ said Carolyn Wallace, director of business operations for South Harrison.
Wallace, a certified public accountant, said she hasn’t seen a revenue number change after being submitted to the state in the five years she has worked with budgets at South Harrison. Schneider has had the same experience for 13 years.
‘All I look at is if my budget was approved, and if it wasn’t approved, ‘Why did you cut it?’ ‘ he said.
And so the vehicle the council chose to disperse the reduction ‘ the one option that required neither additional personnel nor software changes ‘ broke down. The debt service money fit so smoothly into a system that had functioned without it for years, that no one noticed when Denny Stroud, preoccupied by his various duties at the Dept. of Local Government Finance, forgot to do what he had done as a favor the previous two years. He didn’t apply the riverboat revenue to the debt service.
‘It was certainly an extraordinary event. The fact that all three school districts missed that showed it,’ Wallace said.
South Harrison has been under increased scrutiny because of the number of capital projects the corporation has undertaken in recent years.
Prior to the first debt service reduction distribution, the county council ‘made a statement that they didn’t want us to just go out and build more schools. We made it very clear at that point that South Harrison had a long-range plan,’ Wallace said.
Wallace and Clark say the money for debt service reduction has not influenced building decisions. During Monday night’s meeting, Clark said, ‘We take the money and apply it in the spirit it was given to us.’
The school district’s tax rate in 2001 was $1.9821 after being adjusted to reflect subsequent changes in tax law. It was $1.6116 in 2002. Then $1.0492 last year. The total tax rate this year is $1.2565. The rate would’ve been about the same as the previous year with the riverboat revenue debt service reduction.
‘If we didn’t have the riverboat at all in our district, our tax rate would be much higher because of the assessed valuation that is associated with the riverboat,’ Wallace said.
Schneider hasn’t seen any additions to his debt service since 1992. In fact, a few bond issues have been paid off, but South Harrison is growing while his corporation is not. Despite these advantages, a larger tax base is producing a lower tax rate in South Harrison’s district.
North Harrison’s district tax rate in 2001 was $1.7633 after being adjusted to reflect subsequent changes in tax law. It was $1.4090 in 2002, and $1.1484 last year. The total tax rate this year is $1.4362.
As for the riverboat revenue sharing allocation’s impact on planning, ‘In no way has the money that has been given from the council and commissioners ever been considered when going before the state tax board, because it isn’t money that is guaranteed to be there,’ Wallace said.
Projects at Heth-Washington Elementary, New Middletown Elementary and the South Central complex were all financed prior to any debt service reduction allocated by the county, she said.