There’s more to city income-tax proposal than meets the eye

Apart from the potential political backlash, the proposed increase in local income taxes seems relatively straightforward: If five City Council members agree, the 0.15 percent jump would provide Fort Wayne $9.6 million per year for riverfront development and alley and sidewalk construction and repair.

But, as usual, what you can see does not tell the whole story. There’s also a backstory that includes so-far fruitless discussions between city and county officials that might have lowered the proposed increase and more than $3.8 million in additional annual revenues to eight other governmental units that, unlike the city, could spend the windfall any way they please.

Because Fort Wayne accounts for more than 71 percent of Allen County’s population, City Council has the authority to increase the income tax countywide. And although the city’s perceived needs have motivated the proposal, other jurisdictions stand to get their proportional share of the additional $13.5 million the increase would generate annually.

Allen County government would get the lion’s share of the leftovers – a little more than $2.8 million. New Haven would receive an additional $562,067; Huntertown $182,746; Leo-Cedarville $136,888; Woodburn $57,749; Monroeville $46,921; Grabill $40,006 and Zanesville $4,825. City Council members say that if they pass the increase they will also agree to limit its use to the stated purposes (and not for a new downtown arena, for example), but that’s purely voluntary. Under state law, the extra taxes could be used for “any lawful purpose for which money in any … other funds may be used.”

Last September, Allen County extended its wheel tax through 2029 after its Highway Department identified $57 million in bridge-related costs over the next nine years. But the wheel tax alone won’t be enough, County Council President Larry Brown said, which is why the county would use its share of the income-tax increase to pay for streets, bridges or other infrastructure needs.

New Haven Mayor Terry McDonald plans a similar approach. “I know it sounds crazy, but I do support the increase. There is always a need for public works that improve the quality of life. I’d like to do some sort of gateway at U.S. 24 and I-69.”

But what if the proposed income-tax increase could have been cut by 33 percent while still supplying more money for roads and bridges? The deal might have gone something like this, Brown said: County Council would have doubled its wheel tax of $20 annually per car, and the city would have eliminated the similar tax its council enacted last year. In addition, City Council would have reduced its proposed income-tax increase from 0.15 percent to 0.10. “I felt like we could make it work,” Brown said. “It would have been a ‘wash’ for people living in unincorporated areas.” The county’s wheel tax/surtax generated about $7.6 million last year; the city’s about $4.8 million.

But as Brown noted, taking care of streets and bridges isn’t the city’s only concern. A reduction in the income-tax increase would have made less money available for sidewalks, alleys and, yes, riverfront improvements.

“As discussions progressed, and the tax environment became more volatile, we couldn’t get buy-in from the city,” Brown said. “They have some grandiose plans, and it got very uncomfortable. So the county will do nothing.”

City Councilman John Crawford, an advocate of the income tax increase, tells a slightly different story. The county asked for a meeting and suggested the possibility of increasing its wheel tax in exchange for the elimination of the city’s – a trade endorsed just last year by Mayor Tom Henry. “That was the easy part,” said Crawford, who said discussions got “murky” when a possible reduction in the income tax came up.”

“I don’t see how they’re related,” he said.

Would county politicians really have been willing to increase a tax so city politicians could reduce theirs? That’s hard to say, but something has to give because the 2009 agreement under which Fort Wayne and other municipalities agreed to give Allen County some of their county wheel tax income in exchange for bridge repairs expires this fall. If it isn’t extended Fort Wayne, New Haven, Woodburn and the others will have to do a job for which they are ill-equipped.

“We live in a pretty watery place with a lot of bridges, and we need to continue that deal,” McDonald said.

As City Councilman Tom Didier noted this week, the 0.15 percent increase is just a proposal and could change. I mention all of this not to support one proposal over another but to point out how the story we see is seldom the full story – and that one unsuccessful negotiation should not preclude the possibility of another. <br>