County adviser warns Senate Bill 1 will reshape local income-tax options, affect juvenile facility financing

An independent financial adviser told the Tippecanoe County Council that Indiana’s Senate Bill 1 and related changes at the Department of Local Government Finance will force the county to choose new local income-tax (LIT) rates and rework capital and operating plans if it wants to preserve revenue for operations and projects such as a proposed juvenile detention center.

Greg, an independent financial adviser and certified public accountant who presented the analysis, said the new law eliminates many existing local income-tax buckets in 2028 and replaces them with a single maximum county LIT of 1.2%. “Senate Bill 1 is throwing some curves at us,” he said, and the county must give rating agencies and bond investors a clear multi-year revenue pathway if it plans to use income taxes to finance major capital projects.

The presentation laid out the mechanics and timing the council must consider. Greg said a countywide LIT rate will take effect for tax collection in January 2028 if the county and affected units complete required actions in 2027. He told the council it should begin budgeting and negotiating rates in January–February 2027 and finish required approvals by July 2027 so new collections can begin in 2028; he also referenced an August 1 notification deadline for other taxing units and a statutory approval window ending Oct. 1 for some procedural steps.

Why it matters: the adviser’s packet projects that a full 1.2% county LIT at current income levels would generate roughly $70 million a year for Tippecanoe County, but that number would be shared among multiple units under the new structure and could be supplemented by targeted subrates. Greg said the county’s existing combination of smaller LITs would disappear in 2028 and be consolidated under the new 1.2% cap, and that a break-even LIT to replace presently earmarked revenue in the packet would be about 0.5% in his example.

Key policy mechanics described

- State cap and local choices: Senate Bill 1 sets a combined maximum of roughly 2.9% for all local income-tax components and a 1.2% ceiling for a countywide LIT. Municipalities defined as “large cities” (population threshold noted in the presentation) retain separate approval rights for their city LITs. Greg said a local mix of county LIT, city LIT and territory/district subrates must be negotiated so the combined total stays within the statutory maximum.

- Timing and notification: the adviser advised the council to start deliberations in early 2027 and complete any local ordinances and intergovernmental notifications by the statutory windows cited (August notifications and October approvals were mentioned) if the county wants a LIT structure that takes effect for collections in January 2028.

- Revenue and taxpayer credits: the presenter said the state’s adoption of a growth quotient and a homeowner credit (described in the packet as up to $300 per eligible property) reduces county revenues; he estimated the county’s 2026–2027 lost revenue from the credit could range from roughly $1.4 million to $1.8 million (Greg called the statewide credit effect “lost revenue,” noting state staff used the term “lost revenue” rather than circuit breaker).

- Assessed value and tax-rate pressure: Greg outlined how changes to homestead deductions, assessed-value trending and business personal-property rules will tend to reduce residential assessed values while leaving commercial valuations relatively stronger. That shift, combined with lower AV pools, will push local property tax rates higher; he said many counties should expect overall tax rates to approach the 3% cap on certain property classes within a few years absent compensating LIT revenue.

- Personal property and abatements: Senate Bill 1 removes a 30% personal-property floor for new filings and reduces many personal-property true-tax-value factors. Greg recommended revising personal-property abatement practice (suggesting shorter abatements, for example five years or fewer) because taxable personal-property value will decline under the new rules.

- TIF districts and ‘‘neutralization’’: the packet notes the state will attempt to neutralize some TIF impacts so existing debt service is not unexpectedly harmed; Greg warned implementation details remain unresolved and will require coordination with the DLGF and bond counsel.

County options discussed

- Correctional-facility subrate: the adviser noted the statute allows a correctional-facility LIT subrate (he used 0.1% as an example) that the county could impose and retain without city approvals. That subrate, he said, could be structured to pay debt service and operations for a new juvenile facility if bond counsel confirms that a juvenile center qualifies as a correctional facility under the statute.

- Capital-plan sequencing and bond structuring: Greg recommended the council finalize a five-year capital-improvement plan and a multi-year sustainability analysis to present to rating agencies and investors. He described structuring possibilities—including timing payout of existing ceded bonds and aligning new debt service so the county maintains credit strength.

Questions and next steps

Council members and staff asked technical questions about how county and municipal LITs will interact, how virtual “fencing” of municipal incomes affects city pocketing of income tax, and how payroll withholding and employer reporting will change when employees live in different municipal pockets. Greg said many administrative details will require state guidance and that the county should consult bond counsel, the DLGF and the adviser’s office when drafting ordinances.

No formal action was taken at the session. Greg said he and county staff are finalizing the sustainability spreadsheet and will provide the council a copy. He recommended the council decide in 2026–2027 whether to keep, raise or target specific LIT subrates and to develop draft ordinances and intergovernmental notices in the statutory windows to preserve options for 2028 collections.

Ending: The presentation framed the next 12–24 months as a period of statutory transition and fiscal decision-making for Tippecanoe County. The presenter urged the council to begin rate-setting and capital-plan work now so the county retains flexibility to finance operations and any planned capital projects, including a possible juvenile detention center.