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Referendum Portion of Property Tax Reform Could Prove Interesting

New provision may help- won't solve all problems.

What does Bob Kraft think about the provision for referendums that can be imposed in the future before building projects in a community can be approved if the project exceeds a certain cost in terms of money that must be borrowed? The Indiana Farm Bureau lobbyist isn't exactly enthusiastic when asked for his opinion on this portion of the so-called property tax 'reform' bill, but he is downright honest.

"The provisions for the referendums are better than nothing," he says, flatly. "Indiana Farm Bureau remained neutral on this part of the bill. We really never took a stand one way or the other on the idea of referendums"

Here's how it is supposed to work. If a government body, such as a school, wants to build a building that will require over a set amount of borrowing, a referendum of taxpayers in the district must be held and pass. Exactly how the mechanics of that plan will be implemented and carried out is yet unclear. However, the reform package did specify the amount of spending needed to trigger the cap, down to different price tags for different types of buildings, such as elementary schools vs. high schools, that would cause the referendum to be triggered.

Under current law in Indiana, taxpayers can file a petition if they gain enough signatures of taxpayers and thus trigger a run-off petition drive across the taxing district. Those in favor of the project collect signatures, as do those opposed to it. Whoever gets the most valid signatures of taxpayers in 3o days carries the day. If the remonstrators prevail, then the project is put on hold for up to a full year before it can be considered again.

Many believe the referendum process is more direct, and will give a truer sense of whether taxpayers are willing to support a project or not. The risk, of course, is that taxpayers could continue to opt not to approve projects, even if buildings start decaying. The roof of some buildings has literally fell in when this process has been used in some states before a community would ever approve a building project through a referendum.

There was a provision added to Indiana's referendum law in the property tax reform process that Kraft sees as a victory for farmers. If approving a project in a referendum causes property taxes due to exceed a homeowners cap, the homeowner is not off the hook, he n0otes. Any debt service levy approved by referendum is not subject to the cap in the final language of the bill.

"That's a victory because otherwise homeowners could vote to approve every project, knowing that their taxes would never go above the capped level. That could leave the excess to be picked up by other property tax payers in the district, including farmers. But that won't happen according to the referendum portion of the bill was written, Kraft reassures farmers.

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