Tax rate cap not included with Carmel’s 2017 budget

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Brainard

Brainard

The Carmel City Council approved a nearly $131 million budget for 2017 on Oct. 17, which includes a tax decrease, but Carmel Mayor Jim Brainard said there’s no rate cap resolution for 2017, which means, “the budget sets the rate,” he said.

A rate cap resolution is a law passed by the City Council that says that the city rate for property taxes is set at a maximum amount and cannot exceed that. For many years, the council has passed a rate cap resolution, and as a result the tax rate is close to that cap.

For 2016, a proposal would have capped the city tax rate at 70.07 cents per $100, but that died when the city council voted it down in October 2015, 3-4. Instead, the 2016 rate ended up being 83.56 cents per $100 or 19 percent greater than the rate attached to the budget. The lack of a rate cap was one reason taxes went up, but it’s also due to the council appealing the state to recoup more than $4 million in miscalculated taxes during the annexation of West Clay. That accounts for about 6 cents per $100 of the 2016 city rate increase.

For 2017, that 6 cents per $100 will go away, leading to a tax decrease. The council voted 4-3 to pass a rate of 78.85 cents per $100 for 2017.

Brainard said he didn’t want a rate cap resolution for 2017 because it allows for more flexibility without it.

“The rate can float a little bit based on assessed value, but we also did the budget later in the year so we have a better idea of the variables,” he said.

When asked if that means taxes could increase, he said he doesn’t think that’s likely. First, he explained that the overall tax rate is comprised of many parts, some of which could fluctuate, but he thinks the city’s projections are sound.

“We expect to be close to our projections from our financial advisor,” he said. “It might be somewhat different based on appeals and other factors, but it’ll be close.”

During the Oct. 17 meeting, there was a discussion about how much of a tax reduction should be made for 2017. Brainard proposed a penny more than what was passed, saying it would ensure a sufficient operating balance at the end of the year. Despite the penny per $100 difference, Brainard said the city should be fine.

“We are covering the budget with sufficient operating revenue,” he said. “We usually end the year with about $30 million operating revenue.”

Brainard said ending operating balances are important not just because there might be an unexpected financial need, but also because bond rating agencies look at that when they rate the city’s debt, which affects interest rates.

“They want to see a reasonable operating balance,” he said. “If the ending balance is too high, then you’re hoarding money and you probably should be cutting taxes.”

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6 Comments

  1. The mayor is quoted as saying, in part, “… but also because bond rating agencies look at that (ending operating balances) when they rate the city’s debt, which affects interest rates.”

    Did he happen to mention this affecting interest rates?
    “Rating Action: Moody’s Downgrades Carmel, IN’s Lease Revenue Bonds of 2005
    (Performing Arts Center Project) to Aa3 from Aa1”

    Or this?
    “Factors that Could Lead to a Downgrade
    Increases in the city’s already elevated debt burden
    Reductions in the city’s operating reserves and/or liquidity”

    SURELY he mentioned this?
    “Carmel’s lease revenue debt is secured by rental payments from the city. Carmel pledges its unlimited ad
    valorem taxing power (the Special Benefits Tax) to the Series 2005 lease payments. This pledge is not subect to Indiana’s Circuit Breaker taxing limitations but it is subject to abatement risk if the property is unable to be used.”

    © 2016 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and
    affiliates (collectively, “MOODY’S”). All rights reserved.

    Yeah, didn’t think so.

  2. By the election in 2015, the DLGF showed debt as $908,795,295.
    This was nearly double the $447M from 2011.

    According to DLGF as of 11/1/16 Carmel total debt; all sources is $1.238B
    This is a $300+M increase in one year.
    NOTE-in 2 years between EOY 2014 and Nov 2016 Lease Payments have increased by $258M to $819M, a 46% increase in less than 2 years.

    The Total Obligation increases by over 20% in 2017 from $44M in 2016 to $54.4M for 2017.

    https://uploads.disquscdn.com/images/53407194eca216e60007a93bb7e4b7c5afd3ae87a37fa1961eecedb419853b77.jpg

  3. I believe the Mayor, as usual, has been less than honest about the numbers. I can’t remember the last time the City ended the year with $30 million surplus in its operating balance. There may be $30 million on hand in restricted funds but NOT the operating balance. Unfortunately for the Mayor the rating agencies are beginning to catch on! For those who will wish to say I am being mean…it is just like the Election, I tell you what the facts are not what you want to hear!

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