Members of the New Castle City Council are mulling over the idea of a Public Safety Local Option Income Tax (LOIT).

Earlier this week, the council heard from a representative of Umbaugh & Associates regarding the Public Safety LOIT that is being considered by city and county officials.

Many Hoosier counties and cities are finding themselves short of funds following a property tax cap passed by public referendum in 2010. That measure limits property taxes to no more than 1 percent of a taxpayer's homestead, 2 percent of farmland and rental property and 3 percent of a business. The LOIT would provide funds needed to pay for public safety services throughout Henry County.

The general consensus of the city council appeared to be that while no one wants to raise taxes, something has to be done to address the funding shortfall that has resulted from the property tax cap. Council President Mark Koger said if people want police, fire and EMS services, local government has to be able to pay for those services.

"With property tax caps being what they are, we know we're not getting any more money from the state. If (LOIT) is passed, the money can only be used for emergency services. It can't be put in the general fund, it has to be used for emergency services. It's something that we need. It's something the county desperately needs. I know nobody wants to pay more in income tax, I know I don't, but it's something that we really need to look at and address," Koger said.

Council member Mary Malone shared a similar sentiment.

"Nobody wants another tax, but we have to have money to operate the city and right now, because of the property tax cap situation, we don't have the money we need to do a lot of things we need to," she said.

City Clerk-Treasurer Christy York said LOIT would free up general fund dollars now being used to pay for emergency services for other projects like street repair and maintenance, adding that if the measure is passed the funding received by the city will be put to good use.

"We will use the additional revenue to improve services, not just to cover any shortfalls," she said.

If passed, LOIT, which is levied against a person's gross adjusted income (money made before taxes are taken out), would generate about $1,150,486 county-wide that could be used for a variety of expenses including police and law enforcement systems, firefighting and fire prevention systems, the Henry County Jail, etc. New Castle's estimated take from the measure would be $707,620.

The tax would be levied at a maximum rate of 0.25 percent. A household with an adjusted gross income of $25,000 per year would pay $62.50 annually, or $5.21 per month, in additional income tax.

The county and city councils will each vote on the Public Safety LOIT following a joint public hearing at 8 p.m. Sept. 17 at the W.G. Smith Building in Memorial Park. That meeting is open to the public.

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