By TJ HEMLINGER
Staff writer

    State senators Gary “Doc” Dillon, R-Columbia City, and Luke Kenley, R-Noblesville, say the time has come to limit local government debt in Indiana.
    Dillon has introduced a bill in the Indiana General Assembly that would establish controls and requirements for issuance and management of local debt.
    Kenley, who chaired the Commission on State Tax and Fiscal Policy and helped engineer a comprehensive property tax study this summer, said he was pleased to see Dillon’s bill introduced.
    “Approximately 30 percent of all property taxes is going to pay for debt service and levies of capital projects, and we feel that’s too high,” Kenley said. “This bill is geared toward encouraging local government to pay off debt rather than extend it.”
    Senate Bill 18 — Dillon’s bill — was just one of several property tax-related bills introduced during the General Assembly’s Organization Day.
    Dillon said helping local government control its debt would aid greatly in bringing property taxes under control.
    His bill was assigned to the Committee on Tax and Fiscal Policy. Sen. Greg Walker, R-Columbus, and Sen. Brandt Hershman, R-Westfield and the Senate majority whip, have been added as co-authors.
    “I believe these limits are appropriate and will give local governments some good benchmarks to use in their decision-making and long-range planning,” Dillon said.
    One of the key elements in Dillon’s proposal is reducing from 50 years to 30 years the maximum amount of time a bond issue can be paid off.
    “Leaving it at 50 (years) has the same effect as raising taxes on people,” Kenley said.
Other provisions of the bill include:
    • Prohibiting refinancing bonds to final maturities that extend beyond the final maturity of the original bonds;
    • Requiring savings realized as a result of refinancing to be used to repay debt or reduce levies;
    • Requiring a more steady level of retirement of principle throughout the financing period; and
    • Lowering the threshold that triggers County Projects Review to $7 million or 0.5 percent of taxable assessed valuation, whichever is less.
    Indiana’s rate of indebtedness has steadily climbed over the past few years. As recently as 1999, Indiana was among the nation’s lowest in per capital state and local government debt, ranking 47th.
    “But we’ve done an awful lot of bonding in the last six or seven years,” Kenley said.
    More recent numbers from the U.S. Census Bureau show Indiana has risen to 39th in that category. According to Gov. Mitch Daniels, property taxes for school debt service and capital projects have increased more than 8 percent per year between 1984 and 2006.
    “From 2000 to 2006, Indiana had an approximate 10 percent annual increase in school debt service,” Dillon said, citing Larry DeBoer of Purdue.
    Opponents may believe the move to force debt limits is another example of local control being taken away from civic governments, but Dillon and Kenley say the rising tide of debt is a major factor in property tax increases statewide.
    Dillon said civil units of government should strive to limit their debt as much as reasonably possible and are looking at an overall indebtedness limit. He hopes his bill will be a tool to help not only local governments but taxpayers as well.
    “In order to control the rise of property taxes, we must control the growth of debt,” Dillon said.
    The General Assembly convenes for its 2008 session on Tuesday.

http://www.thepostandmail.com/content/view/82260/27/