Report: Local taxes, job options need further scrutiny

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The data confirmed what many Brown County officials and residents had already known.

Brown County’s population is aging and shrinking.

Its property values are high relative to the median income of its residents.

Property taxes are among the lowest, but income tax rates are among the highest in the state. That formula gives people an incentive to own property here but not necessarily to live here.

With fewer residents, tax revenue won’t be able to cover the costs if county government continues to operate at the current level, a group of master’s degree students from the Indiana University School of Public and Environmental Affairs told local residents May 4.

They also said that changing county tax policies and targeting certain kinds of industries in Brown County could reverse that trend.

Further study is needed to fully understand exactly what the county could do to make its finances healthier, such as moving certain expenses into different funds or tweaking the formula of how taxes are calculated, the students said. They also didn’t get a chance to study the county’s debt level.

But expanding the tax base — attracting more residents and higher-paying, more diverse types of jobs into the county — is one suggestion they gave.

See the Brown County Redevelopment Analysis

County council member Darren Byrd was not in the audience for the presentation but said he would study their reports and recommendations.

The council will review budget requests for 2018 in August.

“I don’t think it’s too late to take anything into consideration,” Byrd said about their suggestions.

The students were asked to take on Brown County as a study project by the Brown County Redevelopment Commission, a group of volunteers who are appointed by the county council and county commissioners.

The students — Liza Bartlett, Daniel Lopez and Drew Sherman — pulled data on Brown County population, taxation, property values, tax-exempt properties, wages, commuting patterns and industry from a variety of publicly available sources, including STATS Indiana, the Census and others.

Finding all the data they needed to make accurate historical and county-to-county comparisons was no easy task, they said.

Another of their recommendations was for the county to establish a centralized data portal for tax, budget and population information. That would not only to help leaders make decisions about tax policy, but also increase transparency, they said.

People and taxes

Population forecasts show 54 of Indiana’s 92 counties losing population, the students said.

But among the counties that surround Brown — Morgan, Johnson, Bartholomew, Jackson and Monroe — only Brown County is projected to see a significant decrease in its population from 2020 to 2050, the data said.

In fact, all counties around Brown are projected to see population increases, with the exception of Jackson which is showing less than a 1 percent decrease. Brown County’s projected decrease is nearly 17 percent.

Already, Brown County has the smallest share of the population in that six-county region by far, the data showed.

Fewer people results in a higher tax burden to support government services, unless the government is able to reduce its expenses.

The issue is compounded in Brown County by the fact that much of the land here — which the students estimated at 65 percent based on a New York Times story — is non-taxable because it’s owned by the state or federal government.

Some services other counties have — like paid firefighters — aren’t even in Brown County’s budget as it is now, said Dave Redding, a former county council member and current redevelopment commission volunteer.

“Brown County’s relatively small population must support a large network of infrastructure and emergency services, which are stretched by a flourishing tourist industry,” the students’ report said.

See PowerPoint presentation

From 2011 to 2015, the Brown County Council has consistently charged taxpayers the lowest property tax rate compared to its five surrounding counties, they reported. Yet, the county has increasingly been relying on property taxes as a source of revenue, their data showed.

The county council also voted in 2013 and 2016 to raise Brown County’s income tax rate. The students said it is now the seventh-highest in the state.

Byrd said the rationale for raising income taxes instead of property taxes has been that “in order to be able to afford to pay taxes, you’ve got to have an income.

“If you own a house and fall on bad times, you don’t have income to support it and still have these high property taxes, that’s going to put a burden on someone who doesn’t have as much of an income at the moment.”

Leaving property taxes low “shifts the burden to primarily income, to more of a reliable source, I guess, of affordability,” Byrd said.

That can’t go on forever if the population keeps shrinking, the students said.

“Due to the population decline in Brown County and the number of residents working in other counties, the receipts from the LOIT (local option income tax) will decrease along with the population,” the report said. “This will further stress the burden of generating revenue on other sources, such as property taxes.”

Because people pay the income tax rate of the county in which they live — not the county in which they are working — Brown County having a high income tax rate could play into commuters choosing not to live here, said RDC member Tina Bedey. She has lived in Brown County for about three years, but worked in Bartholomew County for three decades.

Another factor working against people choosing Brown County as home is high property values, the students’ research said. In 2015, the median value of homes in Brown County was $171,186; the state median value was $131,000.

“Further exacerbating the housing challenges are Brown County’s low property tax rates,” their report said. “This has incentivized wealthier individuals to purchase second homes in the county but still spend a majority of their time outside of the county.”

“Brown County is earning revenue from homeowners but losing income tax revenue from those in the workforce,” the report said.

“Finally, the low property tax rates drive up market prices on homes, making it more difficult for lower and median income individuals to afford becoming homeowners,” the students concluded.

Between 1999 and 2014, many Brown County residents have climbed to a higher income tax bracket. The biggest difference was in the percentage of total tax returns from the $100,000 to $250,000 bracket, which went up by 5 percent, their report said.

However, that shift is “misleading,” they said.

While the number of tax returns from the under-$30,000 range went down 7 percent in that time period, more than half of Brown Countians — 52.5 percent — were still in that lowest bracket, the report said.

And because Brown County’s income taxes — LOIT, CAGIT and CEDIT — are charged at a flat rate instead of proportional to a person’s income, people who make less are bearing a higher tax burden than wealthier people, they said.

They called those “regressive” taxes and suggested that the county council give them another look.

The students also studied the job market in Brown County.

Between 2011 and 2015, the number of residents employed outside Brown County has increased faster than the number of residents employed inside the county, the report said.

Brown County has more than twice the national baseline of jobs in the “leisure and hospitality” industry, the students found. Those also are the jobs with the lowest average wage per week among the 12 industries they studied, at $301.

In looking at attracting jobs here, county leaders would do best to “provide more opportunities beyond the food service, accommodations and tourism industry while continuing to support these already significant industries,” the students said.

Sectors they suggested were education and healthcare, information and networks, and business and professional services, all of which pay higher wages and would allow a larger base to spread out the income tax burden.

“More family-centered community development strategies could be implemented as well to appeal to younger families,” their report said.

“Bringing stability to this age group will ensure a steady tax base over time.”

More families also could stabilize the county’s public school population, which has been falling for years. That trend recently prompted a $1 million reduction of the district’s expenses.

What’s next?

The redevelopment commission is currently working on getting a grant to form an economic development plan for the county, and they want to be able to measure whether strategies are or aren’t working. Gathering data is a way to do that.

Their goal is to increase all the CVIs, or community vitality indicators. Those are assessed property value, per capita income, population growth, educational attainment and public school enrollment.

Commission members expressed interest in having a new class of students continue working on this project next school year. This class provided the commission with a sort of how-to guide to carry on their work.

Byrd said the county council is already planning to have an IU class study county employees’ salaries next fall, and they might be looking at the taxation issues these students brought up as well.

“There’s always a concern and a balance that has to be made, and that’s kind of one of these things the study’s going to help shed light on and help us see the strong points and weak points,” he said about tax policies.

Audience members had additional questions that could be studied as well, such as how many households there are in Brown County and how long each has lived here.

The projections shouldn’t be taken as absolute truth, the students said. The data show what could happen if the county proceeds on its current path and makes no changes.

“It’s definitely a reversible trend,” Sherman said. “We don’t want to say it’s a doom-and-gloom situation. There are definitely opportunities to switch that. Even though it’s a large percentage (projected to move out), it’s not a very large number of people.

“It could just be a couple of projects or initiatives that Brown County assumes that can shift the desirability of Brown County as a place to live, and that absolutely changes the trajectory.”