1. Impact of Circuit Breakers on
Local Taxing Unit Budgets
2009 Allen County Fiscal Summit
July 21, 2009

2. What are circuit breaker tax credits?
 Circuit breaker tax credits limit a taxpayer’s total
property tax liability to a fixed percentage of the
assessed value of the taxable property, before any
deductions.
 For taxes payable in 2008, these credits were limited to
residential homesteads with a cap of 2.0%.
July 21, 2009 2

3. How are circuit breaker
tax credits funded?
 Credits are funded by a reduction in property tax
revenues of all Taxing Units in proportion to their
levy.
 Property tax rates may not be increased to offset
the shortfall.
 Funds may not be borrowed to offset the shortfall.
July 21, 2009 3

4. How does HEA 1001 change
these tax credits?
 Reduces the tax caps for residential homestead
taxpayers:
 1.5% limit in 2009
 1.0% limit in 2010
 Expands the tax caps to all other residential,
agricultural land and long-term care facilities:
 2.5% limit in 2009
 2.0% limit in 2010
July 21, 2009 4

5. How does HEA 1001 change
these tax credits?
 Expands the tax caps to all other property taxpayers to:
 3.5% limit in 2009
 3.0% limit in 2010
 Creates additional limits for certain taxpayers over age 65
 Debt service levies in St. Joseph and Lake Counties
created before July 1, 2008, and those created by voter
referendum in all counties are not subject to circuit
breaker tax caps.
July 21, 2009 5

6. Projecting Reductions in Property Tax
Collections Needed to Fund Credits
 Certified assessed values, property tax levies and
property tax rates for taxes payable in 2009 are used
as the beginning point for the study.
 2009 assessed values include adjustments for:
 Loss of net assessed value from expansion of the
supplemental homestead deduction (16.1% reduction)
July 21, 2009 6

7. Supplemental Homestead Deduction
 Changes effective total property tax rates:
 Reduces assessed values used to compute property tax rates by
creating new supplemental homestead exemption for
homeowners beyond current deduction
 35% exemption for first $600,000 remaining assessed value
 25% exemption for over $600,000 remaining assessed value
 Reduces assessed value by $2.55 billion; a 16.1% reduction
 Begins with property taxes payable in 2009
 Note: Reductions in assessed value increase property tax rates
and circuit breaker tax credits.
July 21, 2009 7

8. Illustrative Changes in Assessed Value
Due to Trending and Reassessment
Utilities
Tax Exempt
Residential Vacant
Residential Mobile Home
Other Residential
General Residential
Commercial-Other Housing
Commercial Multifamily Residential
General Commercial
General Industrial
Personal Property
Industrial and Commercial Vacant
Agriculture
* Overall average of 1.72%.
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00%
July 21, 2009 8

9. Actual and Estimated Net Assessed Values for Allen County
(In millions)
$16,500
$15,850
$16,000
$15,500
Net Assessed Value
$15,000
(In millions)
$14,500
$14,000
$13,298 $13,298 $13,230
$13,500
$13,000
$12,500
$12,000
2008 2009 2010 2011
Actual Actual Estimated Estimated
Year Payable
July 21, 2009 9

10. Projecting Reductions in Property Tax
Collections Needed to Fund Credits
 2009 levies include adjustments for:
 Assumption of certain property tax levies by State and
elimination of State property tax credits in 2009.
 Increases in maximum controlled levy limits.
 Loss of cumulative fund revenues due to reduction in
net assessed value from the supplemental homestead
deduction.
 Changes in debt service levies
July 21, 2009 10

11. Elimination of Certain
Property Tax Levies in 2009
 Pre-School and School General Fund
 County Welfare Funds
 Pre-1977 Police and Fire Pensions
 State Fair Board and Forestry
 Note: Reductions in levies reduce property tax rates and reduce
circuit breaker tax credits.
July 21, 2009 11

12. State Assumed Levies
$135,128,820
$380,411
$31,257,123
$103,491,286
County Welfare School General/Pre-School State Funds
July 21, 2009 12

13. Other Factors Affecting Future Levies
 Future Levy Growth
 Controlled Levies
 Assumes increase of 3.8% in 2010
 Assumes increase of 3.6% in 2011
 Debt Service Levies
 Cumulative Fund Levies
 Reflect loss of net assessed value due to expansion of homestead
deduction.
July 21, 2009 13

14. Actual and Estimated Property Tax Levies
$400,000,000
$350,000,000
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
$0
2009 Actual 2010 Estimated 2011 Estimated
County Cities/Towns Library Schools Townships Special
July 21, 2009 14

15. Elimination of State Property Tax
Replacement Funds beginning in 2009
 Phased out state funded property tax relief,
including property tax replacement credits and
state homestead credits in 2009. Temporary
homestead credits are phased out through 2010.
 Note: Reductions in property tax credits increase
effective tax rates and circuit breaker tax credits.
July 21, 2009 15

16. Estimated State Property Tax Relief
$160,484,135
$38,373,787
$85,847,943
$36,262,405
State PTRC Homestead Credit Temporary Homestead Credit
July 21, 2009 16

17. Calculation of Effective Tax Rates
(Homestead Property)
2008 2009 2010 2011
Certified Certified Estimated Estimated
Gross Tax Rate (1) $3.2651 $2.8565 $2.9026 $2.9967
Less: PTRC (0.6330) (0.0000) (0.0000) (0.0000)
Effective Tax Rate before HS Credits 2.6321 2.8565 2.9026 2.9967
Less: State and County HS Credits (1.4312) (0.4774) (0.4012) (0.2915)
Effective Tax Rate $1.2009 $2.3791 $2.5014 $2.7052
(1) Assumes tax rates and credits for Fort Wayne-Wayne Township Taxing District.
July 21, 2009 17

18. Calculation of Net Assessed Value
(Homestead Property)
2008 2009 2010 2011
Gross Assessed Value (1) $74,600 $74,600 $74,600 $74,600
Less: Standard Deduction (37,300) (44,760) (44,760) (44,760)
Less: Supplemental HS Deduction (10,444) (10,444) (10,444)
Less: Mortgage Exemption (3,000) (3,000) (3,000) (3,000)
Net Assessed Value $34,300 $16,396 $16,396 $16,396
(1) Median home value in the City of Fort Wayne, per 2000 U.S. Census Bureau.
July 21, 2009 18

19. Calculation of Tax Bills
(Homestead Property)
2008 2009 2010 2011
Certified Certified Estimated Estimated
Net Assessed Value $34,300 $16,396 $16,396 $16,396
Apply Effective Tax Rate (1) 1.2009 2.3791 2.5014 2.7052
Property Tax Due Before C/B 411.91 390.08 410.13 443.54
Less: C/B Tax Credit 0.00 0.00 0.00 0.00
Property Tax Due with C/B $411.91 $390.08 $410.13 $443.54
(1) Assumes tax rates and credits for Fort Wayne-Wayne Township Taxing District.
July 21, 2009 19

20. Calculation of Tax Bills
(Other Residential Property)
2008 2009 2010 2011
Certified Certified Estimated Estimated
Net Assessed Value $100,000 $100,000 $100,000 $100,000
Apply Effective Tax Rate (1) 2.6321 2.8565 2.9026 2.9967
Property Tax Due Before C/B 2,632.10 2,856.50 2,902.60 2,996.70
Less: C/B Tax Credit 0.00 (356.50) (902.60) (996.70)
Property Tax Due with C/B $2,632.10 $2,500.00 $2,000.00 $2,000.00
(1) Assumes tax rates and credits for Fort Wayne-Wayne Township Taxing District.
July 21, 2009 20

21. How are tax credits funded?
Taxing Unit Tax Rate Levy Reduction
Allen County $0.4957 ($164.87)
Wayne Township 0.1430 (47.56)
Ft. Wayne Community School Corp 0.8408 (279.65)
Allen County Public Library 0.1910 (63.53)
City of Ft. Wayne 1.2431 (413.45)
Ft. Wayne-Allen County Airport 0.0300 (9.98)
Ft. Wayne Public Transportation 0.0531 (17.66)
Total $2.9967 ($996.70)
July 21, 2009 21

22. 2009 Circuit Breaker Tax Credits
Total of $4,759,622
Over 65 $193,839
3.5% $0
$4,552,442
2.5%
1.5% $13,341
$0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000
July 21, 2009 22

23. 2009 Circuit Breaker
Credits by Taxing District
$74,130 $71,660
$226,164 $220,681
$373,392
$968,917
$509,447
$2,315,231
New Haven City-Adams Twp Trans Ft. Wayne-Adams Eacs
Ft. Wayne-St. Joseph Ft. Wayne-Washington
Ft. Wayne-Wayne Ft. Wayne-Aboite
Ft. Wayne-Perry All Other Taxing Districts
July 21, 2009 23

24. 2009 Circuit Breaker
Credits by Taxing Unit
$541,210
$780,484
$303,242
$100,761
$1,128,208
$1,905,717
Allen County Fort Wayne
Fort Wayne Community School Corp East Allen County Schools
Allen County Public Library All Other Taxing Units
July 21, 2009 24

25. 2010 Circuit Breaker Tax Credits
Estimated at $23,633,000
3.0% $145,000
2.0% $15,551,000
1.0% $7,937,000
$0 $3,000,000 $6,000,000 $9,000,000 $12,000,000 $15,000,000 $18,000,000
July 21, 2009 25

26. 2010 Circuit Breaker
Credits by Taxing District
$748,000 $662,000
$791,000
$1,662,000
$5,177,000
$5,357,000
$2,390,000
$6,846,000
New Haven City-Adams Twp Trans Ft. Wayne-Adams Eacs
Ft. Wayne-St. Joseph Ft. Wayne-Washington
Ft. Wayne-Wayne Ft. Wayne-Aboite
Ft. Wayne-Perry All Other Taxing Districts
July 21, 2009 26

27. 2011 Circuit Breaker Tax Credits
Estimated at $29,001,000
3.0% $201,000
2.0% $17,268,000
1.0% $11,532,000
$0 $5,000,000 $10,000,000 $15,000,000 $20,000,000
July 21, 2009 27

28. 2011 Circuit Breaker
Credits by Taxing District
$818,000
$1,285,000
$892,000
$2,063,000
$6,507,000
$6,776,000
$2,928,000
$7,733,000
New Haven City-Adams Twp Trans Ft. Wayne-Adams Eacs
Ft. Wayne-St. Joseph Ft. Wayne-Washington
Ft. Wayne-Wayne Ft. Wayne-Aboite
Ft. Wayne-Perry All Other Taxing Districts
July 21, 2009 28

29. How do we manage the
revenue shortfalls?
 Manage the revenue shortfalls within the
authorized levies
 Reduce spending in anticipation of revenue shortfalls
 Improved efficiencies and cost sharing with other units
 Reduced level of public services
 Develop fees and charges to replace lost revenues
 Adopt user fees where appropriate
 Consider payments in lieu of taxes for tax-exempt properties
based upon value of services provided
 Changes benefit only the taxing unit making the change
July 21, 2009 29

30. How do we manage the
revenue shortfalls?
 Manage the revenue shortfalls by reducing authorized
levies
 Advantage is that resulting reduction in property tax rate reduces
the circuit breaker tax credits of all overlapping taxing units
 Disadvantage is that the taxing unit will only benefit to the extent
that these levy reductions actually reduce tax credits; and then,
only in proportion to their tax rate
 May still experience a revenue loss, but with limited means to
fund the shortfall
 A reduction of a controlled levy cannot be fully replaced if
circumstances change.
July 21, 2009 30

31. How do we manage the
revenue shortfalls?
 Increase the tax base to reduce tax rates
 Release of excess captured assessed value within tax
increment allocation areas
 Modification of guidelines for future property tax
abatement
 Consolidation of service territories
 Fire protection territories
 Consolidation of services provided by multiple taxing units
 Annexation
July 21, 2009 31

32. How do we manage these credits?
 New local option income taxes
 Consider adoption of one of the three new LOITs
designed for property tax relief
 Option A: 1.0% Levy Growth Replacement Tax
 Option B: 1.0% Property Tax Replacement Tax
 Uniform Credits
 Residential Homestead Credits
 Qualified Residential Credits
 Option C: 0.25% Public Safety Tax, if enacted with Option A
or Option B above
July 21, 2009 32

33. Contact Information
Todd Samuelson, CPA
Partner
samuelson@umbaugh.com
UMBAUGH
Plymouth Office: (574) 935- 5178
Indianapolis Office: (317) 465-1500
www.umbaugh.com