State tax changes could shrink Floyd County revenue; consultants outline options

At a Floyd County workshop, consultants from Baker Tilly presented preliminary estimates showing that recent state legislation (referred to in the presentation as Senate Enrolled Act 1 or "Rollback 1") will reduce the county’s property tax base and create budget pressure beginning in 2026.

The review matters because the law changes how homestead deductions, business personal property, and other assessments are handled and restructures local income taxes, shifting revenue sources and deadlines for county decisions. "This is a preliminary draft," said Paige Sansone, a consultant with Baker Tilly. "As this information comes out ... it may get worse over the next couple years as well."

Baker Tilly told the council the legislation will phase in a larger homestead deduction through 2031 and add new deductions for certain property types. Sansone said, "By the time we get to 2031, two‑thirds of your residential property will be ... deducted, so you'll be paying on only one‑third of the taxable property of your residence," a change that will reduce net assessed value and pressure tax receipts.

The firm also described changes to maximum levy growth and local income tax authority. The growth quotient for 2026 is capped at 4 percent, and future growth will be tied to a multi‑year personal income average with a 6 percent cap. The current structure for local income taxes (LITs) expires at the end of 2027; under the new framework, county units may adopt a county services LIT of up to 1.2 percent, and may adopt a separate countywide fire protection and EMS LIT of up to 0.4 percent that will be charged countywide but distributed based on service area population.

Sansone and Baker Tilly walked the council through modeled revenue scenarios. The county could generate roughly $27 million at a 0.9 percent county LIT, about $30.5 million at 1.0 percent, and roughly $36.6 million at the 1.2 percent maximum, according to the presentation. Baker Tilly recommended running alternate scenarios before the county adopts any rate: "We can run all kinds of different iterations on the LIT. Just let us know kind of what you're thinking," Sansone said.

The presentation flagged several specific deadlines and data limitations the county will face. Municipalities or townships that want small‑municipal LITs (for jurisdictions under 3,500 residents) must petition by July 1, 2027; counties have until Oct. 1, 2027 to adopt the new LITs. Baker Tilly noted the Indiana Department of Revenue and the Department of Local Government Finance have not yet produced all the adjusted gross income (AGI) figures by municipality that counties will need to precisely allocate some LIT distributions.

Baker Tilly provided an initial estimate of the direct fiscal impact of the state law: a recurring shortfall for the county general fund starting in 2026 the firm estimated in the range of about $732,000 to $1.1 million as various deductions phase in through 2031. The consultants also noted increases in circuit breaker credits will reduce collectible property tax revenue; Baker Tilly used a working example showing roughly $530,000 being returned to taxpayers in circuit breaker credits in the county scenario presented.

Officials asked about other revenue options. The consultants said a wheel tax (vehicle registration surcharge) adopted at the maximum $50 flat fee could yield about $2.4 million (that figure reflected the surtax and wheel tax combined as presented). Officials were told the county must adopt a wheel tax by Sept. 1 of the year before collection would begin. Sanders noted the wheel tax cannot be carved out for specific vehicle types once adopted and that some vehicle classes remain exempt by statute.

Baker Tilly also reviewed many individual county funds and identified smaller projected shortfalls in reassessment, park levies and bridge funds, while noting some funds (motor vehicle highway, park nonreverting, riverboat receipts, the health fund) showed relative stability under the firm’s conservative assumptions. The firm highlighted that the county’s new public safety LIT fund is certified for about $6.7 million in receipts and that the council has already made an additional appropriation of about $1.4 million into that fund for 2025.

On next steps, the consultants said they are building a parcel‑by‑parcel model and expect to return with updated, more precise numbers in mid‑July; the council asked for an average taxpayer impact analysis for typical households and for scenario runs that show shifting particular funds and levy distributions (for example, moving judicial/correctional LIT portions or using maximum rates on specific LITs while lowering the public safety rate). Sansone confirmed Baker Tilly can provide those iterations once the firm has municipal AGI data and the completed model.

Several council members said they will hold internal discussions before directing specific adoption choices, and asked staff to gather municipal petitions and other local input before any countywide LIT decisions. The workshop closed with officials asking Baker Tilly to update the cash‑flow models and prepare taxpayer‑level examples for the council’s next review.