When the paperwork came from the state, the leader of Franklin schools knew it had to be wrong.
The letter said the school district would lose nearly $15 million to tax caps, which limit property taxes to a percentage of a property’s value.
In past years, Franklin schools had been unable to collect about $2.6 million, superintendent David Clendening said. The letter from the state said to expect a loss of more than five times that amount.
Clendening was speechless.
But then, he began looking at what other local governments would be losing, and he knew something wasn’t right.
Avon schools, for example, was set to lose more than $31 million, compared to previous years of about $5 million.
The issue stemmed from estimates by the state of how much local governments would lose to property tax caps. Those caps were approved by state lawmakers years ago as a way to limit increases in property tax bills. Homeowners don’t pay more than 1 percent of their home’s value, renters and farmland owners pay no more than 2 percent and businesses pay no more than 3 percent.
The caps have been praised by property owners, but have been a constant source of concern for local governments, some who lose millions to the caps each year.
Recently, the state sent estimates to local governments of how much they would lose to the caps in 2017, which is where Clendening and other local schools saw higher numbers than expected.
The state gave high estimates of the impact of the tax caps, and used assumptions when doing the calculations for data that is not yet available, since the actual numbers will be based on property values and budgets that have not yet been set, said Jenny Banks, spokeswoman for the Indiana Department of Local Government Finance.
Local governments were told the numbers were estimates, and were likely on the high side, but can use that information when calculating their budgets for 2017, Banks said.
The actual numbers won’t be ready until at least the spring of 2017, after local government budgets have been set and tax bills have been calculated, she said.
Local officials said they are continuing to prepare their budgets for next year, and not panicking about the estimates from the state.
Clendening expects the school district could lose slightly more to tax caps than it has in past years, but it can’t be as high as the estimate from the state. If the school district did lose that much, it would deplete the savings and they would no longer be able to provide services, such as transportation, he said.
For the city of Franklin, the estimate showed the loss would be about $6 million, when in past years, the city’s loss has been $1 million to $2 million, Mayor Joe McGuinness said.
He is assuming the number just isn’t right, especially considering what other local governments were told, such as Avon schools’ loss of $31 million.
Officials at Avon schools are continuing to talk with the state about the numbers, and how they could change in the coming months, director of finance and operations Scott Wyndham said.