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Controller seeks income-tax reallocation to offset Senate Bill 1 changes; council hears neighborhood and school impacts
Summary
Controller Abby presented Proposal 274 to reallocate income-tax subrates—spinning down levy-freeze and shifting the property-tax-relief rate into public-safety and certified-share buckets—arguing it smooths the transition required by Senate Bill 1 while freeing funds for essential services.
Controller Abby presented a two-step proposal to the Administration & Finance Committee to realign local income-tax subrates ahead of statewide changes under Senate Bill 1.
For 2026, Abby said the county—s certified distribution is $658,000,000 and that the rate residents pay (2.02%) would not change under the proposal. Instead, the city would reallocate how the income tax is split across subrates: the levy-freeze rate would be halved and allocated between certified shares and public safety, and all of the property-tax-relief rate would be shifted to the public-safety income-tax bucket. The stated purpose is to maximize distributions for public safety and essential government services while adapting to the new state credit mechanism scheduled to begin in 2028.
Abby explained the state—s new credit—applied after circuit breaker calculations—will provide larger property-tax relief overall and that local income-tax tools tied to levy freeze and property-tax-relief rates will no longer exist after the SB1 transition. She said the county—s estimate is a roughly $16 million increase in distributions to certified shares and public-safety income-tax rates under the proposed rate shift.
Councilors raised concerns about impacts on school districts and smaller towns. Councilor Mowery relayed an estimate from the CFO of MSD Warren that the change could reduce their revenue by roughly $300,000; Abby acknowledged the estimate and characterized it as about 0.5% of that district—s levy, noting impacts vary by district. Abby said included and excluded cities would benefit from increased public-safety income-tax allocations, while some units could see decreases on the property-tax side but offsets on income-tax distributions.
Abby told the committee the change would spin down a 2025 supplemental distribution and half of the levy-freeze stabilization fund balance in 2026 (per the state's phase-out timeline) and that the council must authorize outreach to the Department of Local Government Finance (DLGF) to confirm rate calculations before final adoption.
The committee moved and seconded the proposal and approved it by voice vote at the meeting.
