GOSHEN — Goshen’s revenue losses are expected to reach 38 percent under a “catastrophic” bill signed by Gov. Mike Braun this spring.
Goshen Common Council during a special meeting last week learned the calculations that the city’s financial firm made after the passage of Senate Bill 1. The tax overhaul bill cuts residential property taxes by up to $300 per year, with the wealthiest homeowners expected to see the most benefit, and raises the minimum threshold for filing business property taxes from $80,000 to $2 million, all contributing to a $1.5 billion revenue loss for local governments over three years.
“When you’re talking about a catastrophic bill, there has been nothing more catastrophic to local municipalities in 50 years than Senate Bill 1. We’re not talking about chump change here – it’s 38 percent of our budget,” Mayor Gina Leichty told the board. “This bill is absolute garbage.”
Goshen’s revenue losses are based on calculations performed by the city’s financial firm, Baker Tilly. Amber Nielsen, a company manager, said they take into account new property deductions and caps on maximum levy growth along with existing “circuit breaker” limits imposed in 2008.
“Baker Tilly has had several of these presentations and conversations. There is not one single municipality that we ran the numbers for who is benefitting in terms of revenue,” she said. “At the end of the day, if you live in Goshen, the legislative changes probably aren’t going to lower your tax bill that much.”
She said the bill includes big changes to the local income tax (LIT), which is collected by the county and distributed among municipalities. Goshen currently receives $13.7 million in LIT, which includes funding for public safety and economic development.
The new LIT structure allows a maximum rate of 1.2 percent for municipalities with a population over 3,500, applied only to the adjusted gross income of taxpayers within town limits. Nielsen gave an estimated LIT revenue of $8.1 starting in 2028, leaving a $5.5 million shortfall compared to the current formula.
She gave the total impact of SB1 as a loss of $807,740 in revenue next year, $734,730 in 2027 and $13.2 million in 2028. Compared to what the city would otherwise expect to receive, she said the estimated revenue reduction is 38 percent.
City and county leaders had expressed fears early this year about the bill’s potential impacts on the income of local governments, libraries and schools, but the full effects weren’t understood even at the time of its 2 a.m. passage in April. Legislators voted without a complete understanding and the state never completed a full financial analysis of the damage about to be inflicted, according to Leichty.
She said the only success opponents had in appealing to state legislators was delaying the start of the impacts, which were originally meant to take effect immediately.
“It was sold as a way of saving our local taxpayer’s dollars, and it is structured in such a way that adding costs to our community members is inevitable,” she said. “Just to dig ourselves out of that 38 percent hole – just to get back to zero – we have to exercise every possible opportunity, and we’re still looking at potential cuts in service delivery.”
Revenue replacement
The promise of significant revenue losses is sending the city scrambling to find new sources to replace it. Leichty said possibilities include a local wheel tax, food and beverage tax or environmental fee, or raising existing service fees.
“We are also in the process of looking at budget adjustments and the structuring and priorities there,” she said. “We may need to take a look at how we deliver our services, whether it’s a frequency or lead times or just overall reduction in the service that we’re able to provide.”
A $15 per vehicle wheel tax would only net the city around $300,000, while charging for trash and recycling pick-up could generate up to $2.3 million a year and a 1 percent food and beverage tax could generate close to $1.3 million. The tax is something Leichty said 13 counties and 13 municipalities currently charge, but an act of the State Legislature is needed to enable it.
“The city council, years ago, had passed in 2015 a resolution indicating that it was willing to ask the state for a 1 percent food and beverage tax. We did not, at the time, find any legislator willing to carry that forward on behalf of Goshen,” she said. “You have to be very specific about what types of things you want to use the food and beverage tax for. Typically they’re used for things that have to do with quality of place, so think about trails or events or supporting community initiatives.”
A local income tax of 1.2 percent would generate around $8 million a year. The county has the option of imposing its own 1.2 percent LIT, Nielsen noted, which effectively discourages people from living in Goshen city limits.
Leichty said it de-incentivizes people from living in populated areas where it’s more efficient to provide services. She said it also won’t change the fact that people from outside Goshen use the city’s resources.
“They’re utilizing the EMS, they’re utilizing our hospitals, they’re utilizing our schools, and yet if they live in the city, they get to pay two income taxes,” she said. “The whole idea that this is any kind of cost savings for our residents is just inaccurate.”
Nielsen added that their calculations only go through 2028, and that the $1 million shortfall will continue to ramp up in the following years. Leichty said they will likely still see a shortfall even if they exercise every income replacement option.
Council members worry that new fees will be a tough sell to residents while Clerk-Treasurer Richard Aguirre expressed a fear that legislators may start taking away revenue replacement options available to local governments.
Leichty said they’re continuing to speak with department heads about what more can be done, whether it’s fee increases in other areas or reductions in expenditures. City department leaders are working through scenario-planning with 10-20 percent reductions to their 2026 budgets before budget meetings start taking place in July.
“So here’s where it gets iffy. Even if we were to do all of those things, based on our current analysis, in year 2028, we would still be $1 million short. And that’s assuming that none of our expenses increase,” Leichty said. “If we’re going to assign blame to anybody, our governor made it explicitly clear that he was going to reduce revenue via property tax mechanism. He pushed incredibly hard, even though Indiana has one of the best tax rates in the nation for both residential property as well as business property, but he made it his mission to do this. Even though the ultimate bill was this Frankenstein of several initiatives at the Statehouse level, cobbled together and passed at 2 in the morning. Here we are.”
