City Council members know a proposed local income tax increase could upset many Fort Wayne residents – but there's still plenty of time to hear from the public before taking action, they said Tuesday.
Council members held their first discussion Tuesday on a plan of action suggested by Mayor Tom Henry's administration to make up for a multimillion-dollar annual budget shortfall caused at least in part by state property tax caps. Proposed options include $5 million in spending cuts but also a new local income tax.
“We will add up to a huge percentage of people who will not like this one way or the other,” said Councilman John Crawford, R-at large, pointing to both taxpayers who could get a higher bill next year and city workers facing reduced benefits.
Since 2009, state property tax caps have cost Fort Wayne about $53 million in revenue, according to city officials. Meanwhile, the city faces a $65 million backlog of unfunded street repairs, and its cash reserves have dropped to $12 million from $20 million just a few years ago.
A special fiscal policy group formed by Henry has suggested that the city add two types of local-option income tax, or LOIT, each at the base rate of 0.25 percent. City officials said the new taxes could generate about $14 million – mostly for police and fire – and free up more space in the budget.
Councilman Glynn Hines, D-6th, praised the administration for bringing the proposals forward early in the year to provide ample time for debate ahead of the fall budget process.
“I feel like we've started the budget process already in preparation for the bottom line in October,” Hines said. “What we have an opportunity to do is to be proactive as it relates to '14.”
City officials hope to cut at least $5 million from the city's tax-supported budget by transferring $3.5 million in annual fire hydrant fees to the City Utilities budget – which is funded by water and sewer rates – and trimming employee insurance and sick time benefits by at least $2 million.
Council will hold further discussions on the city's financial situation Tuesday and March 26. The mayor's office also plans to hold a series of public hearings before June, when council is expected to decide on what actions to take.
“Nothing's been decided here,” said Councilman John Shoaff, D-at large. “We have plenty of time ahead for thoughtful and informed response.”