Senate Bill 1 projected to shrink Franklins property tax base and reshape income-tax revenue sharing, consultant warns

Jeff Peters, a presenter to the Franklin City Redevelopment Commission, told members that Senate Bill 1 will substantially reduce the citys assessed-value base and change how local income taxes are collected and distributed.

Peters said the bill increases supplemental homestead credits and eliminates the standard homestead credit, reducing the taxable share of a typical owner-occupied home from about one-half of market value today to roughly one-third under the new law. "When this legislation is done being implemented between 2026 and 02/1931, that will fall to about a third," he said. He added that other credits for veterans and special groups are also included.

Peters described additional changes to other property classes: rental residential and care facilities would see taxable shares fall from 100% to two-thirds, and the threshold for reporting business personal property would jump from $80,000 to $2,000,000, removing many smaller business personal-property accounts from the tax base.

Peters said the combined effect of a narrower assessed base and higher rates will increase the number of properties that qualify for tax caps and reduce net levy collections for both the city and the Redevelopment Commission. "We're going to drive up rates," he said, and "the city and the Redevelopment Commission will net collect fewer tax dollars of the levy that is actually established at the beginning of the budget cycle."

On income tax, Peters said the current countywide pooled system will be replaced by multiple state-held pools. Counties may impose a countywide 1.2% rate and retain that revenue; cities above 3,500 in population could impose a 1.2% rate that applies only to city residents. "In Franklin being above 3,500, you will have the ability or the city council will have the ability to impose a 1.2% income tax just on their people," Peters said.

Peters gave illustrative estimates, noting the Department of Revenue must collect new data beginning in 2025 and that final distributions will depend on policy choices by the county and cities. He said Franklin currently receives about $12.3 million in combined income-tax shares under existing law and that, under one scenario in which the city imposes 1.2%, the city could gain revenue; under other scenarios the city could lose about $2.5 million annually if the county does not impose certain levies.

Peters also warned the bill removes a 30% floor for business personal property placed in service after July 1, 2025, which could reduce future TIF increment from depreciated personal property. He said the Department of Local Government Finance (DLGF) has been directed to "neutralize" windfalls tied to assessed-value changes, which, Peters said, could block automatic TIF gains from rate increases. "We don't know exactly what that's gonna look like, but every year during, July right before assessed values are certified, we do a neutralization of the base assessed value," he said.

Commission members asked procedural questions about timing and dependencies. Peters said counties and cities must set rates between July 1 and Oct. 1, 2027, and that outcomes will depend in part on how the county chooses to allocate the new pools and whether the county imposes separate fire and EMS levies. He said legislators have signaled additional changes may be proposed in 2026 and 2027.

The commission did not take formal action on the presentation. Peters' remarks were informational and intended to help the commission anticipate how TIF revenues, bonding capacity and requests to fund non-TIF city operations could change under the new law.