Clayton advised to seek county income-tax allocation as state law cuts assessed values and business taxes

At a recent Town of Clayton budget meeting, Greg, the county financial adviser, told town officials that Indiana's Senate Bill 1 will reduce net assessed values, shift tax burdens and shrink certain business and personal-property tax revenue, and he recommended the town ask the Hendricks County Council to adopt a local income tax (LIT) rate that would allocate funds to small towns like Clayton.

Greg said Clayton's share of income taxes is currently small under the county's system: the town's LIT receipts are estimated at about $147,000 annually while Hendricks County collects roughly $46,000,000 in total income tax. He told officials the county can set a maximum LIT rate of 1.2 percent and that, as currently described, the county may retain 75 percent of any county-enacted portion.

The town's financial picture is changing under the new law, Greg said. He described projected declines in net assessed values (AV) of about 4 to 7 percent per year across several years, which would cause tax rates to rise even as taxable bases shrink. He also warned that business personal-property taxes will be driven toward zero for many taxpayers (Greg cited a $0'to'200,0000 threshold and depreciation changes on the Form 103 filing) and that the Department of Local Government Finance'mandated maximum levy adjustments will not fully restore town revenues.

"If we don't [get the county to act], you would lose a $147,000," Greg said, adding that without replacement revenue the town's current service levels would be at risk. He recommended that Clayton draft and pass a resolution asking the Hendricks County Council to enact a rate allocation under the new LIT framework and to send that resolution annually so there is a record of repeated requests.

Greg emphasized how the new law treats towns with populations below 3,500: those towns cannot unilaterally set the 1.2 percent rate and must rely on county action. He said towns above 3,500 may apply for a rate themselves. "We're going to ask for the 1.2%," Greg said when describing the recommendation to put the town on record requesting replacement income-tax revenue.

Council members and staff discussed budgeting tactics while the law is phased in. Greg advised conservative budgeting and recommended the town update its five-year capital-improvement plan and be prepared to show the county how much revenue the town expects to lose under the new law. He also walked through operational details: the town's general-fund projected ending balance and operating balance (figures shown in the meeting materials), the mechanics of levies and AV declines, and the role of utilities (for example, keeping sewer-utility revenue separate and assigning proportional costs to the utility).

Greg flagged several administrative points officials should expect: the Indiana Department of Revenue is expected to implement geofencing technology to allocate income-tax receipts (the agency has piloted geofencing in some counties), the State Board of Accounts and the Department of Local Government Finance will issue additional guidance for how new revenue is split and reported, and county council timelines will affect town deadlines for submitting budget data.

Town officials agreed to draft a resolution and to attempt to present a single-page summary of projected revenue losses and the amount of LIT replacement the town would seek. The council scheduled further budget discussions and asked staff to prepare preliminary '26 budget numbers for the next meeting; Greg and staff agreed to produce draft numbers and an updated sustainability projection for review.

No formal vote on a resolution or ordinance was recorded at the meeting; the discussion produced a plan to draft a resolution, pass it at a future council meeting, and submit it to the county auditor and county council for consideration.

Next steps identified at the meeting include: producing the draft resolution for council consideration, preparing a one-page summary of projected budget losses for county submission, and holding another budget session on July 10 to review preliminary '26 numbers and projections.

Ending: Town officials said they will continue to monitor guidance from state agencies and advised residents that Clayton will pursue a request to Hendricks County to replace lost revenue under the state changes to property and personal-property taxation.