How much will it raise?
EDIT tax pros and cons
By VICKI URBANIK
Beginning July 1, Porter County wage earners will begin paying an income tax
– though the tax adopted just 50 minutes before Monday’s midnight deadline
will come no where close to solving the county government’s fiscal crisis,
won’t offer property tax relief, and won’t be available to spend until next
The 0.25 percent County Economic Development Income Tax was enacted by a 4-2
vote by the Porter County Council after Chesterton killed the county’s
preferred tax plan for a County Option Income Tax.
Following Chesterton’s defeat of COIT, the county council in turn deadlocked
3-3 at a late night meeting Monday on the other major form of the income
tax, the County Adjusted Gross Income Tax, which would have cost wage
earners up to three times as much as the COIT plan without raising
significant new revenue.
Porter County Porter County Council President William Carmichael said
without the revenue that COIT would provide, the county now will have no
choice but to make severe cuts.
“We’re going to have a shutdown,” he said.
Though so far there have been no firm decisions, county officials have
suggested shutting down county departments a few days a week, meaning that
many employees could either be terminated or demoted to part-time status and
lose their health coverage; closing the North Porter County Government
Complex in Portage; and/or increasing fees and charging municipalities new
fees for county services, such as holding their prisoners at the county
Carmichael said the council will now need to meet with the Porter County
Commissioners to establish where the county goes from here.
When asked if the council will try again next year for the COIT -- which
would mean that new revenues wouldn’t become available until January, 2005
-- Carmichael said he personally won’t initiate the tax again.
“I’m not going to go through that whole business again,” he said, although
he also made it clear that the fact that his council seat is up for election
next year would have no impact on his tax stand.
EDIT Pros, Cons
With an EDIT tax, Porter County will join all but four of Indiana’s 92
counties that have some form of the income tax.
One benefit of the EDIT is that it eliminates all interest payments on the
state loan secured to offset the Bethlehem Steel bankruptcy, saving the
Duneland School nearly $1 million and the county government, $500,000 over
the 10-year loan repayment period.
And the EDIT tax revenue – estimated at $3.15 million annually for the
county government and $545,000 annually for Chesterton – can be spent on a
variety of capital projects that must be delineated in a plan established by
each city and town and the county government.
But unlike COIT, Westchester Public Library and the Porter County library
system won’t get a share of the money. Nor will the townships or the county
And unlike COIT, the money can’t be used for general operating expenses of
government, the area where county government and municipalities are most
Somewhat ironically, though the county council last week endorsed a
COIT-EDIT tax totaling 0.4 percent, the EDIT tax rate that will take effect
July 1 is slightly higher – 0.25 percent higher – than either the
stand-alone COIT rate or the stand-alone EDIT rate the county favored.
EDIT, CAGIT Votes
If the council had not passed either the CAGIT or EDIT on first reading last
week, it would have been nearly impossible to consider any back-up tax
following Chesterton’s vote, since a unanimous decision would have been
needed to adopt an ordinance in one meeting.
The EDIT tax that was adopted at 11:10 p.m. was significantly altered from
the initial form it took last week. Last week, the council agreed 6-1 to use
the EDIT revenue toward early elimination of the inventory tax paid by
businesses. Only Robert Poparad, D-1st, voted no, though he spearheaded the
idea of axing the inventory tax.
Since last week’s vote, however, it became apparent that eliminating the
inventory tax would leave hardly any new revenue from EDIT.
On Tuesday, council member Rita Stevenson, D-Portage, made a motion to
remove the inventory tax language, in effect freeing up the revenue for
capital projects for the county, towns and cities. The motion passed 4-2,
with Poparad and Carole Knoblock, D-4th, the only ones voting to keep the
business tax cut intact.
The same vote division took place on EDIT itself: Poparad and Knoblock voted
no, while Stevenson, Carmichael, John Ruge, R-at large, and Al Steele, R-3rd
Council member Karen Conover, R-at large, was absent. Carmichael said she is
in Montana with family members.
The council opted to distribute the EDIT revenue based on population, not by
property tax levy as the state would also allow. Even though all but one
municipality gave the county no help on COIT, the county council handed most
towns and cities a bonus by choosing the population distribution formula.
The county government itself would have actually come out ahead -- by about
$600,000 -- had it chosen the levy distribution.
CAGIT, which would have been imposed at the maximum 1 percent rate failed,
with Carmichael, Ruge and Steele voting yes, and Knoblock, Poparad and
Stevenson voting no.
With Conover absent, the two “swing” votes on CAGIT were Steele and
Stevenson. Last week, Steele voted against the CAGIT, while Stevenson voted
for it. They switched their respective stands on Tuesday night. Stevenson
appeared to have firmed up her position just before Monday’s meeting, since
after the Chesterton vote, she indicated support for CAGIT.
She was the last council member called to cast the vote, thus killing CAGIT.
Despite the late hour of the special meeting, a good-sized audience attended
the council meeting, presenting a flurry of last-minute emotions and
viewpoints for or against CAGIT.
Helen Boothe of Dune Acres fired the opening salvo by asking how council
members would personally benefit by either CAGIT or EDIT – specifically how
Knoblock, a large landowner, would benefit by the tax break for farmers
offered by CAGIT and how Poparad, a business owner, would benefit by
eliminating the inventory tax.
Poparad said he would indeed get a break by not paying the inventory tax.
But with a 1.25 percent CAGIT-EDIT rate, “I’ll pay a helluva income tax.”
"It’s not like I’m getting away scotch free,” he said.
Knoblock, too, agreed that CAGIT’s tax cut would benefit her as a farm
Hebron Town Council member Chris Stalbaum – whose town convened a public
hearing on COIT Monday but opted not to take a vote once it learned that
Kouts endorsed it, 3-2 – told the council that CAGIT won’t generate anywhere
near the revenue the county government needs.
He said no taxing unit will be able to survive this year, due to the delayed
reassessment that at best will allow taxing units to collect only up to 70
percent in taxes compared to last year.
Since the county and municipalities are “already out of luck,” he urged the
council to adopt CAGIT at its lowest level possible.
But Carmichael, who noted that CAGIT will raise significant new revenue in
about five years, said enacting an even lower rate will only prolong the
Hebron is facing numerous budget problems of its own, Stalbaum said. “I’m
not in your boat, but I will be after this night is over,” he said.
Another Hebron resident, Valerie Kubacki, questioned what she characterized
as threats by the county of what may be in store now that COIT failed. She
specifically questioned the suggestion that the county begin charging
municipalities for jail services.
“You’re not paying the full costs,” Carmichael said of the towns and cities.
“You will not provide services for us because we’re a town,” Kubacki
Carmichael also called on audience member Gus Olympidis, a prominent
business owner who has been one of the leaders against COIT.
Olympidis only commended the council for the process. “The very future of
our county depends on your deliberation,” he said.
Several representatives of the Porter County Farm Bureau, Inc. spoke in
favor of CAGIT. Farmers and businesses would have benefited the most by
However, once EDIT was enacted, a farm bureau official urged the county to
ensure that the money be used for county government -- not as a tax break
How much will it raise?
The following are the projected estimates of how much a 0.25 percent EDIT
tax will raise annually for the county, cities and towns. The money will be
distributed based on population and must be used for economic development or
capital projects only. As the law now stands, the money won’t be available
until May, 2004.
County government: $3,150,000
Burns Harbor: $40,000
Dune Acres: $11,000
Beverly Shores: $37,000
The Pines: $41,500
Ogden Dunes: $68,500
Source: Larry DeBoer, Agricultural Economics, Purdue University.
EDIT tax pros and cons
Some pros and cons of the Economic Development Income Tax adopted Monday
•According to information provided by the Ice Miller law firm of
Indianapolis, EDIT can be used to pay bond payments or any capital project
for which the county and municipalities could issue a general obligation
bond or establish a cumulative fund. These include new buildings, computers,
police cars, voting machines, airport or park improvements.
•Many of the county government’s capital expenditures, such as police cars
and computers, have already been taken out of the county’s general fund,
paid for instead through the Cumulative Capital Fund, which has its own tax
However, the county government must meet a federal mandate and purchase new
voting equipment, estimated at $1.4 million.
•As with the other two income taxes, wage earners will pay the EDIT tax
based on their Indiana adjusted gross income. But unlike the other two
income taxes, non-residents pay the full resident rate for EDIT.
•EDIT may be used to finance or pay for economic development projects, such
as acquiring land, renovating buildings, or paying administrative expenses
associated with a specific economic development project. It cannot be used
for operating expenses except those that plan or implement economic
•EDIT funds can be shared among the county, cities or towns. Theoretically,
Chesterton or Porter could give all their EDIT funds for use by the county
•EDIT funds are not distributed to libraries or townships, unlike the County
Option Income Tax.
•The county government and each city and town must prepare a plan, which
will include a public hearing, outlining how they will spend their EDIT
•EDIT provides no property tax relief, unlike COIT or the County Adjusted
Gross Income Tax. EDIT can be enacted in conjunction with COIT or CAGIT.
•Wage earners will begin paying the EDIT rate on July 1, but the county,
cities and towns will not actually receive the money until May of next year,
under current state law.
•The EDIT revenues can be used to eliminate the inventory tax on businesses
earlier than 2007, which is when the state will require that the tax is
eliminated in its entirety. However, the inventory tax elimination might not
take effect until 2005, based on new information provided Monday by council
attorney Dave Hollenbeck. Also, virtually all of the EDIT funds would be
used to offset the inventory tax.
•EDIT may be rescinded, increased or decreased within certain parameters
allowed, but only between January 1 and April 1 by the adopting body. The
EDIT rate can go up to a maximum of .5 percent.