Andy Grimm | Post-Tribune | September 28, 2009
Tax bills will begin appearing in mailboxes across Lake County next week, and they’re sure to bring a smile to the faces of executives at ArcelorMittal, U.S. Steel and BP.
The bills for 2008 are the first to show the effect of state-mandated tax caps, the latest reform to come in a decade-long saga that changed how, and how much, local governments collect tax dollars.
Under legislation passed in the spring, tax bills cannot total more than 1 percent of a home’s assessed value, 2 percent for rental property and 3 percent for businesses and industry. Lake County, however, will phase in the limits starting with 2008 bills, with caps set at 1.5, 2.5 and 3.5 percent.
The caps are the latest attempt in a reformation of Indiana’s tax system that has radically altered how much government can raise from tax dollars, and who pays them.
U.S. Steel, the county’s largest taxpayer and owner of the massive Gary Works complex, will see its tax bill drop $12 million — from $35 million in 2007 to $23 million in 2008 — a cut of 34 percent that represents tax caps and a $40 million reduction in the taxable value of equipment. In 1999, the corporation paid $66 million in total taxes.
The swing is a right-sizing of bills that historically had been out of whack for business in Lake County, U.S. Steel spokeswoman Erin DiPietro said in a written statement.
“Homeowners’ property taxes have been capped for many years in Lake County and have not been affected by changes in business taxes,” she said. “Even with improvements in the tax environment in Lake County, U.S. Steel’s Gary Works remains the highest taxed steelmaking facility operated by our company in the United States.”
The tax reform package included an exemption for homeowners that excludes 35 percent of a home’s value from taxation, and includes a state-funded credit that restores $16 million to taxing districts across the county. But those savings don’t equal the 20-1 ratio between homeowners and business and rental tax cap savings, said Jim Wieser, finance director for Lake County Auditor Peggy Katona.
Other major industrial taxpayers saw similar declines in their bills this year. Despite nearly doubling the assessed value of their property in 2008, BP will have an $18.3 million bill, $1 million less than the petroleum company paid last year. In 1999, BP’s tax bill was $66 million.
For 2000, Inland Steel paid taxes totalling $40 million. In 2003, after Inland and neighboring ISG both were bought by ArcelorMittal, the two companies combined to pay just $13 million. This year, ArcelorMittal will get a bill for $18 million, more than $1 million less than its 2007 bill.
“Everyone is getting a break, business and homeowners, and landlords,” said Lake County Council President Larry Blanchard.
“The old ways, the tax rates were insane and business paid more than their fair share. Now I think the pendulum has swung the other way, and homeowners are bearing the burden.”
But there are losers. Local government units won’t take in the $70 million held out by the tax caps, creating massive shortfalls for communities, especially those that are home to those same three major industrial taxpayers, said Joe Gomeztagle, a tax expert whose 1991 lawsuit over the tax bill on his St. John home launched sweeping tax changes.
“Everybody’s getting a good deal in that they’re not getting hit with high taxes,” Gomeztagle said. “But what they’re not getting, particularly the homeowners, are the services from government.
“And it’s not equitable now. The industry is not paying their fair share.”
Lake County will suffer a $17 million shortfall from tax caps, prompting county officials to cut 150 jobs from the payroll.
In Gary, where a special exemption allows the city to bill residents more than the 1.5 percent/2.5 percent/3.5 percent caps, officials still face a shortfall of more than $30 million. Homeowners will see just $1.8 million of tax relief.
Tiny Whiting, a city where most of the tax base is BP’s massive refinery, will lose $1.35 million in revenue to caps — nearly 10 percent of the total city budget. Only $72,338 of that shortfall represents cap savings for homesteads.
BP spokesman Tom Keilman praised Whiting officials for successfully cutting the cost of city government to match declining revenues, and noted that the smaller tax bills for the BP refinery reflects a number of tax deductions beyond the 3.5 percent cap. The changes to the Indiana tax structure were a factor in BP’s decision to make $3 billion in upgrades to their refinery.
“The big concern is how the state provides a tax situation that supports continued development and growth, but also provides the various levels of government what they need to operate,” Keilman said. “We’re a global company that has operations worldwide. This impacts our local facilities’ ability to compete for global capital.”