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Township trustees warn new state tax laws could cut local services, urge county help
Summary
Township trustees told the Kosciusko County Council that changes in state law — including Senate Bill 1 and House Bill 1461 — will reduce township revenues, require new capital improvement plans and force transfers of reserves to a new roads and infrastructure fund starting in 2027.
Julia (last name not specified) and about 17 township trustees addressed the Kosciusko County Council to describe how recent state legislation will affect township finances and services.
The trustees said Senate Bill 1 and House Bill 1461 will alter local income tax distribution, impose levy growth caps, and require new capital planning and transfers that could reduce township revenues. Julia said townships statewide face a projected annual loss of $25,500,000 by 2028 due to the combination of deductions, levy growth caps and the change to local income tax distribution. She said the local income tax (LIT) changes are not effective until Jan. 1, 2028, and that county councils will have sole authority to approve LIT rates after that date; townships could receive up to 0.2% of LIT revenue only at county-council discretion.
On House Bill 1461, the trustees said townships must adopt a capital improvement plan (CIP) starting Sept. 30, 2025, and face a mandatory transfer beginning Jan. 1, 2027: 30% of the amount by which unrestricted fund balances exceed the next year's budget must be moved into a new township roads and infrastructure fund. Township leaders said guidance from the Department of Local Government Finance (DLGF) and the State Board of Accounts has been inconsistent on whether CIPs must be advertised or whether the county council must receive the CIP, leaving trustees uncertain about compliance.
Trustees warned the rules could force difficult choices for local services such as volunteer fire departments, cemetery preservation and community programming. Julia said the new rules will affect newly created fire territories (capped at $0.40 per $100 of assessed value for territories created after Dec. 31, 2024) and that some townships are concerned about losing LIT distributions they now use to fund services. She said the township association plans to return to the county in July 2027 with a resolution seeking a share of LIT funds unless state action changes.
Council members acknowledged the trustees’ concerns and said county officials and associations are discussing possible responses at the state level.
Ending
Trustees urged residents to contact legislators about the bills and said they are working with the Indiana Township Association and local accounting partners to prepare CIPs and other compliance steps ahead of the 2027 transfers.
