Daviess County commissioners hear Baker Tilly analysis of Senate Bill 1 and revenue options

Daviess County commissioners on an unspecified date heard an analysis from Jason Stenler of Baker Tilly on how Senate Bill 1 will affect the county's tax base and revenue options.

Stenler told the commissioners the law "is going to reduce property taxes" for many homeowners while moving more revenue reliance to local income taxes and other buckets, and that the law will phase in changes that will shrink the county's tax base over time. "I think your tax base is gonna be decreasing over time," he said.

The analysis matters because the law combines and reorganizes several local income-tax buckets and changes property- and personal-property tax treatments, reducing revenue available to counties while changing which units keep portions of local income taxes. That could force Daviess County to adopt new local revenue sources or reallocate existing ones to maintain current services.

Most important findings

- Senate Bill 1 reorganizes local income-tax buckets and phases out some property-tax credits; Stenler said 2028 will be the year when many counties see the biggest impact. He described the new structure as a single county rate that counties may adopt up to 1.2 percent and separate allocations for EMS, fire territories and small towns.

- Personal property exemptions will change: the transcripted summary notes the current de minimis exemption of $80,000 will increase to $2,000,000 in 2027; equipment depreciation floors (historically a 30% floor for tax calculations on equipment) will not apply to new equipment installed on or after Jan. 1, 2025, allowing depreciation to fall as low as state-prescribed minimums (Stenler referenced 10% or 20% for certain pools).

- Stenler illustrated revenue options and tradeoffs. Using the county's 2026 estimates, he said generating about $1 million in additional revenue could be done by adopting an EMS local income-tax rate of about 0.09 percent (kept 100% by the county but restricted to EMS operating services) or by adopting a broader public-safety rate of about 0.13 percent (which must be shared with cities and towns and can be used for a wider set of public-safety expenses). He told the commissioners, "If you adopt a public safety rate, you'd need to adopt a rate of .13% to get that same million dollars in revenue," because the public-safety share is distributed to municipalities.

- Stenler presented estimated taxpayer impacts for the county: with a median household income of $68,561 he estimated that adopting a 0.13 percent public-safety rate would raise local income tax paid by the median household by about $83.84 annually; adopting a 0.09 percent EMS rate would increase the same household's local income tax by about $58 annually.

Other fiscal options

- The County's CCD (capital development) fund is outside the levy growth limit and the county can increase that rate up to a statutory maximum. Stenler noted a modest rate increase on the CCD fund could net $200,000 to $210,000 for capital needs, but said a May 31 deadline meant any change would be effective for 2027 collections rather than 2026.

- Stenler recommended robust operating reserves; his guidance was to hold a minimum ending balance of 15 percent of operating budgets and a recommended target of 25 to 30 percent, with some clients targeting 50 percent because of the greater revenue volatility when relying on income taxes.

Questions and next steps

Commissioners asked about details such as whether the 1 percent homeowner cap rises as property values increase (Stenler confirmed it does) and whether large taxpayers in TIF districts or utilities would be affected (he said TIF expirations and the elimination of the 30 percent floor for new equipment would reduce tax collections over time). Stenler also flagged that large investments such as wind and solar projects may negotiate payments in lieu of taxes or other agreements to preserve county revenue.

The commissioners asked staff to gather additional figures and forecasts and to bring EMS cost projections to a follow-up meeting. The board directed staff to schedule a special meeting before the October deadline if it wishes to adopt a rate for the 2026 calendar year; commissioners also discussed holding a public-information meeting if they decide to pursue a 2026 rate change.

Stenler offered to prepare additional scenarios and follow-up materials. "I'd be happy to answer any other questions or to show other scenarios," he said.

Why this matters

The change shifts some tax liability away from property owners and toward income taxes and may concentrate or redistribute net revenue among counties, cities and towns depending on where residents live. For Daviess County, Stenler's analysis shows choices the commissioners will face about whether to adopt EMS or public-safety local income taxes, raise CCD rates for capital needs, or rely more heavily on reserve balances to smooth future revenue gaps.