Barbara King, North Vernon Plain Dealer & Sun

"Shocking" and "disturbing" were the words used to describe the city's future financial footing as the state's property tax cap is phased in over the next two years.

Financial consultant Frank Cummings reported on the impact of the mandated cut in property taxes to the North Vernon City Council at a special budget meeting Monday, Dec. 14.

This year, the city lost $66,000 in property tax revenues. Cummings said the loss will approach $229,653 in 2010 and $236,098 in 2011.

"I had not thought you'd be impacted that much," he said of the impending cut in revenue. "The property tax cap hit a lot harder than I thought."

When the cap is in full effect, residential property taxes will be capped at 1 percent. That means a person with a $100,000 home will pay $1000 in property tax.

However, if there is a homestead credit for the property, the tax would be reduced to $350.

"I'm worried that some local legislators don't understand what it'll do to local governments," Cummings told the Council.

Moreover, the Indiana legislature is considering amending the state constitution to include the cap on property tax. If the constitution is amended, it would be just about impossible to ever implement a property tax increase, according to Cummings.

To make up for the shortfall, Cummings predicted "changes in income tax" would be forthcoming.

The City of North Vernon currently does have a cash balance in the bank, something which City Councilors have diligently tried to build up. However, if no budget cuts are made for 2010, the cash balance could be exhausted at the end of 2010.

"Some hard decisions need to be made," advised Cummings, a former State Board of Accounts employee.
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