Terre Haute mayor eyes monthly trash fee to lessen deficit

"We have to go back and revisit the trash fee," the mayor told the Tribune-Star on Wednesday. "Every city has a trash fee but us, pretty much, in the state. The general fund pays a $2.5 million per year [trash] contract. We are paying that bill with $9 million less coming in" annually to the city's general fund from property tax collections as a result of state property tax caps approved by Indiana voters in 2010, the mayor said.

Bennett has stated that a fee of $9.25 per month to the city's approximately 23,000 households would generate about $2.6 million. Instituting a trash fee, however, would require approval from the Terre Haute City Council.

The mayor had hoped city coffers would be bolstered by a revenue-generating project with California-based Powerdyne, which was to have made an advanced payment of $3 million late last year in a deal to convert sewer sludge into diesel fuel. It was delayed after the deal was questioned for enforcement of contractual payments from the city without approval of the City Council.

"We were counting on that funding; that was our plan, but it didn't happen," Bennett said. "We are still counting on that this year, but it didn't help us last year."

The city ended 2014 with a negative cash and investment balance of more than $5.4 million in the general fund, used largely to pay salaries and benefits, according to a year-end report from the Indiana State Board of Accounts.

The city received more than $7.7 million in tax anticipation warrants last year, of which more than $4.99 million was repaid by the end of 2014. The warrants are short-term loans that are repaid from future property tax collections.

"We had a tax anticipation warrant of about $5 million, which we repaid, and took out another smaller warrant of about $2.7 million" to be used to get the city through the first six months of 2015, Bennett said. That warrant, by law, must be repaid by the end of this year.

Bennett said the general fund's beginning cash balance in 2014 would have been in the black had it received the $5 million payment in December 2013, instead of January 2014. Even so, the city's general fund still accumulated nearly a $1 million deficit during 2014.

Paul Joyce, commissioner of the Indiana State Board of Accounts, was asked by the Tribune-Star if the city has the authority to continually operate in a deficit.

"Authority is a big question; however, there is no such thing as negative cash," Joyce said. "No one should really be in a 'deficit or negative' balance. For Terre Haute, it is purely a deficit balance."

The city, Joyce said, has options to raise money. One is to request assistance from the Indiana Distressed Unit Appeals Board to allow a special taxing authority and issue low-interest rate loans. That board could appoint an emergency manager to oversee the city's budget. "Right now, no one has that authority to step in and fix that problem. Unless the city requests this action, it is up to the mayor and the City Council to correct this," he said.

The city is not considering that option, largely used under bankruptcy, according to the mayor.

Another option, Joyce said, is an increase in local option income taxes. The county has a County Adjusted Gross Income Tax (CAGIT) rate of 0.75 percent and a County Economic Development Income Tax (EDIT) rate of 0.5 percent. The CAGIT rate could be increased to 1 percent. An increase in a county income tax, under state law, would have to be made by the Vigo County Council.

Last year, CAGIT generated $13.8 million, with Terre Haute receiving more than $5.1 million of that amount, and EDIT generated $9.4 million, with the city receiving more than $4.5 million.

"These are the alternatives given by the state Legislature to fund local units," Joyce said. "It is really hard to go and complain about the property tax structure if you are not fully utilizing what is there now. That is where you go first. It would be the city asking the county to raise this. It is a combination,  and they have to work together."

Bennett is skeptical that the County Council would approve such an increase. Instead, he favors establishing the trash fee and monitoring expenses.

"The county has no need to raise income taxes because the county has not been affected by the tax caps at nearly the rate the city has, and the county was not impacted by a lower assessed value as much as the city," the mayor said.

Vigo County’s assessed value for real property in 2012 dropped more than $300 million, or 7.5 percent, with the city accounting for more than 80 percent of that drop. The value is used to calculate property taxes paid to governmental units.