Although the city budget totals about $1 billion, city-county officials really only have flexibility with about $593 million - the rest are dedicated funds that can only be used for certain expenditures. In addition more than 80 percent of that $593 million is spent on public safety and criminal justice, i.e. police, fire emergency management response, homeland security, courts, prosecutor, sheriff and public defender.
To close the shortfall, Mayor Greg Ballard's administration has held the line on spending, found efficiencies, called for the elimination of the local homestead tax credit and expanded the taxing district of the old Indianapolis Police Department to include the entire county. So how will this hit your pocketbook? Well, it depends. If you live inside the old IPD district you'll likely see a tax cut since the base is being expanded. Right now, someone who earns $100,000 pays about $365 a year, that would go down to about $114 annually. If you live outside the old IPD district, you'll see an increase of about $114 a year. Throw in the elimination of the local homestead, if your home hasn't reached the 1 percent tax cap, and that goes up to about $144 a year or $12 more a month.
Now, nobody likes to pay more in taxes, and you will not find a bigger anti-tax person than yours truly. Unfortunately, a lot of Indianapolis' problems stem from the fact that we don't have enough people in the city paying income taxes. According to the last bit of data I looked at, 27 percent of the households in Indianapolis make less than $25,000 annually. This is not good. And here's some more bad news, there are about 207,000 folks who commute to Marion County from the donut counties. If 50,000 of those folks stayed in the city (and let's assume their average income is about $50,000) there would be no budget gap, in fact there would be a surplus. Indianapolis/Marion County used to be the largest contributor to the state income tax coffers. That honor now goes to Hamilton, Hendricks, Boone, Johnson and Hancock counties.
And why do people leave the city? The usual reasons: schools, crime, quality of life.
To solve Indianapolis' long-term financial issues, we are going to need more taxpayers, or as I call them, productive people. How do you do to that? You do what the city is already doing: You invest in projects like infrastructure, parks, cultural trails and other developments. You may not like the Market Square Arena project or any other project that involves high-income or high-tech jobs, but here's a newsflash: These are the people who are paying for more city services than they are likely to consume. And, no offense, if I had a choice of what type of folks I want to be the majority of my city's residents, I'll take taxpayers over tax consumers any day.
You were probably aware that Indianapolis is facing a $55 million budget shortfall, mostly stemming from the decline in income tax revenue over the past few years. Some folks want to blame property tax caps, but that becomes less of a factor each year as the impact of tax caps stabilizes and actually brings a certain amount of predictability to future planning. The real culprit is income taxes.