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Schools fret over business tax loss

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A proposal to end a tax on business equipment would result in a cut of about $1.5 million each at two local school districts, officials said.

The money pays for building maintenance, bus replacement and transportation at Franklin and Clark-Pleasant schools, which already have stopped routine maintenance on buildings, delayed replacing buses and put off filling positions for teachers, classroom aides, bus drivers and other employees who resigned or retired.

Property tax caps already limit how much local governments can collect. Those caps limit the amount of money both school districts have to cover expenses, and in 2015 that loss is expected to be more than $3.2 million each for the two school districts, according to a report from the Indiana Legislative Services Agency.

State lawmakers are considering eliminating the business personal property tax, which is charged on any equipment used by a company to generate a profit. If the proposal were approved, Clark-Pleasant would lose nearly $1.5 million in 2015, and Franklin would lose more than $1.8 million, according to the legislative services report.

This year, Clark-Pleasant has a total budget of more than $62 million, and Franklin’s budget tops $52 million.

Other local school districts would lose between $8,500 and $412,000.

Part of the reason the losses at Franklin and Clark-Pleasant will be felt more intensely is because of building projects, including the construction of Franklin Community High School and Clark-Pleasant Middle School, over the past decade.

Gov. Mike Pence had proposed eliminating the business personal property tax, saying the move would make Indiana more appealing to new businesses and would help existing businesses grow. This week, Pence said he was willing to work with state lawmakers to find alternatives.

Local government officials, including those in Johnson County, had raised concerns about the impact eliminating the property tax would have on their budgets.

Lawmakers who represent parts of Johnson County had said they would consider the idea but wanted to find a way for local governments, such as schools, to replace the money they would lose. One alternative is giving counties the option to eliminate the tax on all new business equipment. Another would involve creating a different tax to replace any money lost.

A new tax likely would not be welcomed by area residents, who in the past five years have voted against multiple referendums for school building projects, a jail expansion and a new library branch in Franklin, Franklin schools executive director of finance Jeff Mercer said.

“Nobody wants to have taxes raised. I certainly get it. But if that’s the only option the General Assembly is going to provide to cities, counties and schools, I don’t think in Johnson County there’s a great possibility that will happen,” Mercer said.

Neither school district knows for sure where to make additional cuts, and those decisions would be made by a committee of teachers, administrators and residents.

School officials could continue to look for ways to cut spending in funds that pay for buses and building maintenance, but they also might have to start cutting spending on employees’ salaries and benefits, Mercer and Clark-Pleasant business director Steve Sonntag said.

“It might be great for businesses in Indiana. But we definitely need to examine this because there would be a reduction in services to the community,” Sonntag said.

At Franklin, school officials spent most of last year refinancing debt that paid for $133 million in building projects and also eliminated 18 teaching positions — which should save Franklin about $1 million this year. All of the cuts made by the school district should be enough to make up for the roughly $3.5 million in property tax cap shortfalls Franklin was expecting every year for the next decade. But as a result that also means Franklin can’t replace any of the teachers or other cuts that were made, Mercer said.

“We feel like we’ve kind of gotten that part sorted out. But it’s a battle to do that,” Mercer said.

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