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Property taxes: Who pays?


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Thousands of homes surround most Center Grove schools, with the closest businesses generally being restaurants and stores along State Road 135.

Much of the school district’s income from property taxes comes from Center Grove area homeowners, which covers the costs of bus purchases and repair, building renovations and maintenance, and debt payments.

Homes make up the largest percentage of the Center Grove area’s tax base, or 78 percent of the total value of taxable property in the school district.

The setup is not ideal. Officials in other school districts want to collect most of their tax dollars from businesses, which pay more under the state’s property tax cap system, which limits tax bills.

The districts can earn more in property tax dollars off industrial and commercial properties, which have tax bills capped at 3 percent of their assessed value rather. The cap for residential properties is 1 percent.

Due to the size and value of businesses, as well as the higher tax caps they have, school districts would earn more in tax dollars from a corporation than from the owner of a home.

But the situation works in Center Grove, which has the highest assessed value of all the area school districts and is where many of the more expensive homes in the county are built.

Homes in the Clark-Pleasant school district have lower values, so the school district needs more industrial and commercial property to bring in the money needed to pay for new buses and new computers, Superintendent Patrick Spray said.

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“There just definitely needs to be some balance. We have a lot of starter homes that generate a lot of students,” he said.

About 52 percent of the property value in the Clark-Pleasant school district comes from residential property, but the district’s total property value for tax purposes is about half of Center Grove’s. Homes priced for first-time buyers in production-built neighborhoods don’t contribute as much total value to the school district’s tax base, but they also bring new students the schools must educate and offer programs to.

About 39 percent of Clark-Pleasant’s total tax base is commercial and industrial properties, but the total taxes the schools get from those businesses is limited because of Greenwood’s eastside tax-increment financing, or TIF, district, Spray said. Many of the commercial and industrial properties are in the TIF district, so the school district doesn’t collect taxes on business expansions or new commercial or industrial construction in that area. The tax dollars instead are set aside for economic development projects by the city.

Having more business growth than residential property growth typically would mean the population isn’t growing as quickly as the companies, so corporations are paying for more school services for fewer students, Purdue University professor and tax expert Larry DeBoer said. That means the companies are paying more of the property taxes than residents are, bearing more of the tax burden that funds schools, libraries and local governments, he said.

“It is useful for all communities to have at least some business property to help pay for public services because the public services go largely to people, not businesses,” he said.

If an area has a lot of lower-priced homes, plentiful students and less business development, then residents have to pay for any tax increases, and the schools tend to get less money per student for school services, he said.

“Most places, having more industry will increase your assessed value per pupil,” he said.

For Center Grove, having more homes in its tax base isn’t a problem because of the high value of those homes, Chief Financial Officer Paul Gabriel said. For example, the median sale price of a home in White River Township last year was about $180,000, compared with Pleasant Township, where the price was about $110,000, according to statistics from the Metropolitan Indianapolis Board of Realtors.

“I think we’re satisfied with the way things are,” Gabriel said. “We’ve been fortunate for the past couple of decades for having moderate growth. Not rapid growth and not decline, and I’ll take it just the way (it is).”

Clark-Pleasant would have to have many more homes than Center Grove has to create a similar overall assessed value because homes there don’t reach the price tag of the custom-built, high-end neighborhoods in Center Grove, Spray said.

Bringing business is the fastest way to grow school districts’ property tax collections, and attracting new companies to the area means bringing more residents, who bring new students, according to Jeff Mercer, Franklin Community School Corp. executive director of finance.

Johnson County school districts can’t control the types of properties they collect taxes on, but the districts occasionally promote their communities to companies in hopes they will construct buildings that earn the local governments higher tax dollars.

Franklin Community Schools has a board member serving on the city redevelopment commission, and the district works with the Johnson County Development Corp. to promote the city as it can. For example, school officials met with leaders from Italian manufacturing companies in March to answer questions about the local schools.

Franklin school officials want to see growth across the board, Mercer said.

“We’re interested in all of the above,” he said.

More important, though, is where the schools lose money, a key focus for budgeting, Mercer said.

“What we do pay attention to is what we’re losing,” he said.

About 14 percent of Franklin schools’ tax base is agricultural land, which is where the school loses the most money due to property tax caps. In 2008, the state legislature limited property taxes to no more than 1 percent of the value of a home, 2 percent of agricultural or rental property and 3 percent of commercial or industrial property. Franklin lost $3.4 million of its tax levy to property tax caps in 2013.

At Greenwood schools, businesses make up more of the total tax base than homes, and that mix has been good for the school district, director of fiscal services Todd Pritchett said.

The variety, with more commercial and industrial than residential assessed value, has mostly protected the school district from financial losses to due to tax caps, he said.

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