Financial adviser outlines how state’s Senate Bill 1 could shrink Franklin’s tax base and shift income-tax authority

Jeff Peters, the city’s financial adviser, told the Franklin City Council on Oct. 20 that recent changes in state legislation (discussed in the meeting as “Senate Bill 1”) will materially alter local property- and income-tax rules and could reduce Franklin’s available revenue.

Peters said the law will cut the assessed share of residential (homestead) property so that, once fully implemented, taxable assessed value for many homes will fall to roughly one-third of gross value. He said other property classes would also be reduced (rental/residential/ag properties to about two-thirds of current assessed value), and the exemption threshold for business personal property that must be reported will rise from $80,000 to $2,000,000, removing more business personal property from local tax rolls.

Those assessment changes, Peters said, will lower the city’s assessed base and can trigger higher tax rates and more properties hitting statutory caps on growth. He told council members that Franklin has seen assessed-value growth recently (he cited a 12.6% increase for pay 2026) that may blunt some effects, but he nevertheless warned of "a few $100,000 a year" in lost property-tax revenue and later cited a possible $500,000–$800,000 annual reduction tied to credits referenced in the legislation.

On income taxes, Peters outlined a new regime that shifts distribution rules. He said the county can impose countywide income taxes up to a combined cap and may also impose a 0.4% levy for fire and EMS that—if levied—must be shared with municipal fire departments and fire protection territories on a population/area basis. He said cities with more than 3,500 people could impose a local 1.2% rate on residents inside city limits; because the Department of Revenue will need to build local income datasets, local governments will not be able to finalize those decisions until mid- to late 2027.

Peters offered estimates the council can use for planning: a 1.2% local income tax solely on Franklin residents might produce roughly $9.5 million, compared with roughly $9.9 million the city currently receives in certified shares; Franklin also receives about $2.4 million from a county economic-development income tax, putting a current combined total at about $12.3 million. If the county imposes the optional 0.4% fire/EMS levy and shares it with the city, Peters said Franklin's usable proceeds could rise by about $4.4 million (to roughly $13.9 million); if the county declines to impose that levy, Peters estimated Franklin could be short about $2.8 million annually compared with recent receipts.

Peters also discussed how the law affects redevelopment/TIF districts, noting the Department of Local Government Finance (DLGF) will be directed to “neutralize” any TIF windfalls that otherwise result from assessment changes. He said the law also imposes a new referendum requirement for debt if a municipality’s debt-service rate goes above certain thresholds.

Council members asked clarifying questions about timing, county decisions, and how the city might use TIF and property tax security to finance future projects (Peters said new financings would likely be structured as property-tax-secured bonds given uncertainty around income-tax pledges). Peters emphasized many details will be decided in the 2026–2027 legislative sessions and in county choices that precede the city's action window.

Why it matters: Peters’ presentation maps out plausible revenue scenarios and timing constraints the city must consider when budgeting and planning capital projects. Multiple council members stressed the need to follow county and legislative developments closely before committing to major new programs.