The city council Monday approved an increase in the local Economic Development Income Tax rate in hopes of generating an additional $440,000 in revenue next year.
Now its members must sit back and wait to see if other Knox County communities get the behind the legislation as well.
Council members debated the increase in the rate for nearly two hours before finally voting 5-2 in favor of moving it forward. Tim Salters and Ashley Morris cast the two dissenting votes, both arguing that the council should give more thought to ideas “outside the box” before digging into the taxpayers pockets.
And even some council members who voted in favor of the legislation did so begrudgingly. Shirley Rose, in casting her supporting vote, said she thought it was “the wrong time” to raise taxes, while Chuck Sebring said he was “50-50” on the issue, adding he didn’t see any clear alternatives to a tax increase to help address significant revenue shortfalls predicted over the next two years.
Sebring again expressed his frustration at having to take on the issue in such a short time frame.
The council was approached about raising the rate two weeks ago and had to make a decision one way or another Monday night, according to Indianapolis financial advisor Ben Roeger.
“My heart says one thing,” Sebring told the group. “But my mind says another.”
The legislation’s wholehearted supporters were president Duane Chattin and vice-president Scott Brown.
Chattin said he knew the issue wouldn’t be a “popular decision,” but he didn’t see any other way to raise the kind of money the city needs. Revenue projections predict a significant drop in assessed valuation over the next two years and, as a result, shortfalls of more than $300,000 in 2015 and $1.6 million in 2016.
The council, he said, has been “exploring options for awhile,” and now must act on something that will result in new revenue. Not doing so, he said, could potentially cause the city’s demise.
Chattin also pointed out that the council has for years complained about the number of properties being taken off the tax roll by expansions at Vincennes University and Good Samaritan Hospital. Several of them have argued that those two organizations should “pay their part,” Chattin said.
Raising the income tax rate is one way to do that.
Most of the discussions about the issue have centered around the fact that the county’s “jail tax” will be expiring at the end of the year. The increase of .15 percent would be less than the .25 percent rate of the jail tax.
Mark Hill, a member of the city’s Board of Works and a former city council member, was one of just two people who took to the podium to speak about the new tax during a public hearing held before the meeting.
He called the tax increase “fair.”
“None of us likes passing taxes, but that is the necessity of the office,” he said. “The timing is good, and the net result would be a reduction in taxes.”
“A year from now, the tax burden will be less than it is today,” he said. “It’s plain and simple.”
Still, Salters and Morris challenged their fellow members to look to other options of raising revenue, although none was brought up or discussed specifically.
Salters said when the council first realized the severity of its financial situation, members agreed to look at “anything and everything,” to find a solution.
“And yet we’re jumping on the very first option presented to us,” he said. “I want a cornucopia of ideas. What else is out there? What else can we do? I want to see every stone unturned.”
“Then go find the stones,” Brown yelled in response. “You can’t just say, ‘Think outside the box.' Tell us what is outside the box then.”
Morris echoed Salters comments and argued that the council should first take time to explore other options before “taking money out of people’s pockets.”
“When people ask, can you honestly tell them that we have explored all other options?” she asked Brown. “Because I can’t.”
Councilman Ryan Clark expressed his support for the tax, saying he would rather raise the rate than see friends and neighbors who are city employees lose their jobs and have no income at all.
Mayor Joe Yochum, too, said he supported the increase only because the only alternatives are lay-offs and cuts to city services, things he has been trying to avoid.
Cuts, however, aren’t off the table completely as the council members agreed that the tax, should it receive the support it needs, won’t totally fill in the gaps.
To move forward, the legislation needs support from the representatives of at least 50 percent of the county’s population, and since Vincennes makes up about 48 percent, council members need support from the lawmakers in at least one other county municipality.
Should Bicknell, for instance, throw its support behind the tax — Bicknell would receive an additional $47,800 next year — then the tax change would be easily approved.
If not, the city would need some combination of towns like Bruceville, Decker, Oaktown, Wheatland, Sandborn or Monroe City or even the county itself to move the legislation forward and collect the revenue.
With projected revenue of $618,000, the county would stand to receive more than the other municipalities combined, but most of the county council members have said they don’t want the new tax.
Chattin indicated that he has talked to council members in other county communities and has found a “serious chance” that the tax will be approved.
“As long as the city council takes the lead,” he said.