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Mayor Henry unveils budget options; new income tax likely

Tuesday, March 12, 2013 - 12:01 am

A typical Allen County taxpayer could soon pay about $120 more each year and Fort Wayne government will likely scale back employee benefits as the city tries to tame its annual budget shortfall.

Mayor Tom Henry on Monday announced the options suggested by a special fiscal policy group he formed last year to address a tight fiscal situation that city officials blame largely on state property tax caps.

“We know that difficult decision will have to be made, but I'm confident we'll meet those challenges,” Henry said in a news conference. “We continue to be tasked with finding alternative revenue sources to maintain services that our citizens expect.”

City officials hope a combination of cuts and new tax revenue provide room in the budget for new police and fire department recruits, more annual street repairs and improvements to parks.

City Council and officials with Henry's administration on Tuesday will begin discussing the options, some of which are expected to be approved in June ahead of the fall budget process. They include:

• Two new types of Local Option Income Tax, or LOIT, which could generate about $14 million each year for the city, mostly for police and fire.

• Changes in how the city awards sick time to employees and provides insurance benefits to the spouses of city employees.

• $5 million reduction of annual operating budget.

• Shifting of fire protection fees worth about $3.5 million per year from the property tax-supported budget to City Utilities, which is funded by water and sewer rates.

• Future annexations to bring more Allen County taxpayers into the city.

• $1 million expenditure from “Legacy” fund annually for five years to help pay for neighborhood street repairs.

City Controller Pat Roller said the new income taxes, which would each be enacted at the base level of 0.25 percent, would cost an extra $126 each year for a person who makes $58,000 each year and owns a home worth about $100,000.

Councilman John Crawford, R-at large, said the tax increases – along with some budget cuts – would be necessary for the city just to maintain the services it provides now.

“We're not necessarily talking about huge increases in what we're doing, we're talking about not cutting what we're already doing,” Crawford said. “If we want to keep things the same, we've got to consider possible revenue increases.”

To help fill a deficit in this year's budget, council last year took $1.8 million from the city's cash reserves and another $3 million of interest generated by the $75 million Legacy fund created from the lease and sale of the old City Light utility to Indiana Michigan Power.

City officials have projected a recurring $6 million annual deficit without action by council and the mayor. Meanwhile, the cash reserves have dropped to $12 million from $20 million just a few years ago.

“The status quo is not an option that's on the table,” said John Stafford, director of the Community Research Institute at IPFW. “Something will have to change.”

Henry vowed Monday that “I will not lay off a city employee as a result of this discussion,” but employees can expect proposed changes to their benefits. For example, as proposed by city officials, workers would no longer be able to accumulate sick days but would get a set total of five sick days a year.

The city also would no longer provide primary health insurance for the spouse of a city employee if the spouse's employer pays at least 50 percent into a health insurance plan. City officials acknowledged they would need to negotiate the changes with unions that represent many city workers.

“We know there will need to be changes in the contract,” Roller said. “We hope the unions understand this is very pivotal.”

City officials will appear before council Tuesday, March 19 and March 26 to discuss the proposals. The mayor's office also will hold a series of public meetings before making final decisions in June.