Johnson County finance chief warns Senate Bill 1 will shrink property tax revenue; appeals and LIT changes shape 2026 budget

Mike Reuter, Johnson County’s fiscal director, told the County Council that a set of state changes and a pending “growth appeal” will be the key variables shaping the county’s 2026 budget and long-term fiscal strategy. Reuter said the county’s assessed valuation rose sharply this year, but that the net tax effect for many taxpayers depends on a combination of the new Supplemental Homestead Credit in Senate Bill 1 and whether the county’s appeal for additional levy capacity is approved by the Indiana Department of Local Government Finance (DLGF).

Reuter said the DLGF has certified the county’s maximum levy calculation at a 4% increase for most units and explained that the only routine way to go beyond that limit is an approved growth appeal. “You mathematically would qualify for a million $9.14,” Reuter said of this year’s appeal amount, but he cautioned the council that the DLGF is taking a stricter, more subjective review of appeals this year and that approvals will likely be harder to obtain than in the past. He told the council to plan cautiously and prepare budget scenarios both with and without the appeal.

Why it matters: Senate Bill 1 and the DLGF’s guidance change how property and homestead relief are applied, reducing some revenues that counties historically relied on. Reuter said Johnson County’s assessed valuation increased about 12.3% this year, which on its face is strong, “but the legislative changes change the calculus.” The council must decide whether to adopt a higher budget now — which helps an appeal by showing obligations and encumbrances — or budget more conservatively in case the appeal is disallowed.

What Reuter presented: Reuter said he updated the county fiscal plan to reflect six months of actual collections and the latest revenue forecasts. He highlighted two large revenue items: property tax (affected by Senate Bill 1 and by any growth appeal) and the county’s share of local option income tax (LIT), which is certified this year at roughly a 4% increase countywide. Reuter also noted the legislation’s new homestead credit and changes to business personal property, and he warned that the state’s certification and the timing of Senate Bill 1 implementation create a narrow window in which appeals are allowed this year.

Council response and staff direction: Council members asked Reuter to show two baseline scenarios — one that assumes the growth-appeal amount is approved and one that assumes it is not. Several council members said they prefer to approve budgets conservatively and add back items if the appeal is approved; others argued the county should present a higher budget to strengthen the appeal case by documenting planned obligations (for example, highway projects that would be funded by the appeal). Reuter recommended the council prepare both versions and said he would update the fiscal model as departments submit final changes.

Specific figures and points Reuter gave the council: - Certified maximum levy increase for most units: 4% (DLGF certification). Reuter: “The only way you go beyond 4% is if we get a growth appeal.” - County assessed valuation increase reported to the DLGF: about 12.3% (countywide). - Growth-appeal eligibility (mathematical): about $1.9 million this year (Reuter cited roughly $1,914,000). Reuter also said past appeals ranged from several hundred thousand to more than $1.7 million. - Reuter said the DLGF is applying closer scrutiny to appeals this year — including an examination of multiyear cash balances and whether the county can “get through” without the appeal — and that getting approval will be more difficult than in earlier years. - Reuter reported the county’s beginning cash balances and stated the county’s general-fund cash position is healthy, but that large capital programs (notably highway and bridge projects) and state revenue changes will drive tough choices in coming budgets.

Council mechanics and next steps: Reuter will incorporate council direction and department adjustments into an updated fiscal plan prior to second reading. Several council members asked staff to: (a) produce a budget version that omits the appeal revenue, (b) produce a version that includes the appeal and shows where those dollars would be spent (notably highway/bridge projects), and (c) supply clear comparisons showing how Senate Bill 1’s homestead credits and other deductions change typical homeowner tax bills. Reuter said those updated scenarios would be ready for the council’s next budget meeting.

Reuter’s bottom line to the council: “I think we should ask for the appeal — I think we should ask for it — but we need to be prepared not to get it,” he said. He urged the council to weigh near-term capital obligations, the county’s healthy cash position, and the likelihood of a stricter DLGF review when deciding which budget path to adopt.

What the council said: Council members emphasized they want to avoid making structural spending commitments that rely on one-time or uncertain revenues. Several asked staff to identify which planned capital projects could be delayed or phased without immediate operational harm, and they asked finance staff to explain the effect of moving certain expenditures between funds (for example, highway reserves and nonreverting accounts) so the impact on cash balances and appeals is transparent.

Taper / forward look: Reuter told the council he will update the fiscal model after departments submit any changes and that he will provide parallel “with appeal / without appeal” scenarios at the next meeting. The council signaled it will consider conservative budget options while retaining flexibility to add back priority projects if the appeal is approved.

Quotes (selected): - “The Department of Local Government Finance is taking a deeper dive this year. They’re asking you to demonstrate you can’t get through the ensuing year without it,” Reuter said of the appeal review. “The tone of them is pretty bold. I think we’re going to find it a real challenging year to get both appeals approved.” - “You mathematically would qualify for a million $9.14, our largest yet. But they have put things into the appeal like we’re — if you have more than a 30% cash balance for the last three years, you have to explain that.”

Sources and evidence: Reuter presented updated fiscal-plan spreadsheets, the county’s certified levy numbers and assessed-valuation figures, and DLGF guidance on growth appeals during the meeting. Council members asked for additional, auditable scenarios and a clearer breakdown of bridge/highway projects that would use appeal revenues.

No formal vote was taken at the presentation. The council requested updated fiscal-plan scenarios and directed staff to provide “appeal / no-appeal” budget drafts for second reading.

Ending: The council must balance two competing goals: protecting county services and credit standing by avoiding unsustainable structural increases, while also presenting a credible obligation plan if it pursues the DLGF growth appeal. Reuter told the council he would deliver updated scenarios so members could weigh both paths at the next budget meeting.