$15M shortfall looms over Lake County
By Rich Bird Post-Tribune correspondent August 1, 2012 1:38PM
Updated: August 1, 2012 7:17PM
CROWN POINT — Lake County government is facing an estimated $15 million shortfall in the 2013 budget, which will require officials to make some hard choices going into the upcoming budget hearings.
According to both John Dull, attorney for the Board of Commissioners, and Dante Rondelli, financial adviser to the County Council, the shortfall was born of a three-headed monster: Roughly $6.2 million in federally mandated improvements to the Lake County Jail, declining tax collections and the county’s health insurance program.
On Wednesday, the commissioners approved a $15,000 contract with Merrillville-based financial adviser Cender and Co. LLC to provide possible funding options.
Dull told the commissioners that the shortfall is in the low double digits and later amended that figure to between $12 million and $15 million. Rondelli later said that $15 million is the baseline going into budget negotiations, and could fluctuate depending on what comes to the table.
The contract’s scope-of-services agreement indicates Cender will prepare an analysis of financing options, including expanded and extended borrowing more general obligation bonds. The agreement also mentions the possibility of selling and leasing back county properties and facilities, such as the jail, the satellite courthouses in Hammond, Gary and East Chicago and the Lake County Government Center in Crown Point.
In addition to the $7 million in bonds recently approved for the settlement of a class-action suit alleging overcrowding the unsanitary conditions at the jail, the U.S. Department of Justice has mandated millions of dollars in improvements.
Last month, Sheriff John Buncich asked the council to let him pay for a vacant police officer position with a fund from towing fees. The council approved the move, with the caveat that he may have to find other areas to cut because of the “dark cloud” that Rondelli was projecting.
Meanwhile, the county has been seeing less and less in property tax revenue. Dull contends the decline in collections is a combination of the state-mandated tax caps, which prevent the county from levying for the shortfall outright; the way that the some of the units are budgeting; and the general state of the economy.
Cender also will provide recommendations on the county’s ability to finance its self-insurance reserve funding.
The concept of selling a property and leasing it back is not a new one, Dull said. That practice was used both when the county undertook the construction of the jail annex and the new juvenile center. In fact, the county already has the property corporation in place to use, should that become an option.
Borrow, or tax?
The elephant in the room not mentioned in the contract is the whether elected officials will reconsider some form of a county option income tax to generate more revenue and free itself from the tax cap.
Rondelli said council members have been mum.
“They will not,” he said. “They will not even discuss a preliminary hearing with the (Indiana Department of Local Government Finance) or tax advisers on the forms of income taxes. My advisement has been we should at least start discussing it. Internally, there is no forward progress or discussion on income tax.”
In the council’s defense, Rondelli said steps have been taken to reduce the impact of the “dark cloud,” including cuts of 20 percent from general fund budgets and levies over the last five years, cuts of 325 general fund positions since 2008, and borrowing from internal reserves.
“We’ve gone down the cut path. We’ve gone down the internal borrowing path … This isn’t the first attempt at this issue. We’ve done other things. We haven’t sat here idly,” he said.
As for more possible borrowing solutions that may come from Cender’s analysis, Rondelli said if the council members pursue that course, they should do so with a long-term plan.
“I’m not part of that,” he said. “That was just an option given to the leaders. My recommendation is not to exercise that without a plan to reduce the tax rate; lower the levies collectively or raise your (assessed values). One way to lower your levies is to cut your budgets or find new revenues, i.e. income tax.”
According to the state’s 2011 figures, the most recent available, the average tax rate in Lake County is $3.41 per $100 of assessed value. In the rest of the state where all of the other counties have instituted some form of county option tax, the average runs between $2.07 and $2.33.
“That buck is the impetus behind the problem,” Rondelli said. “So what’s the solution? Get the tax rate down.”
While no dates have been set, the public presentation of department budgets likely will begin in late August, followed by a first reading of the budget by third week of September and final reading in the second week of October.
In between, council members will have to roll up their sleeves and make some decisions.
“It will require one of three things: massive amounts of new revenue, massive cuts and massive borrowing,” Rondelli said.