By Leslie Bonilla Muñiz
Indiana Capital Chronicle

INDIANA — Property taxes again took center stage during tax reform discussions Tuesday — with farmers asking for a reprieve and local units of government seeking to head off significant cuts in revenue.

“That’s it: how do you make (the system) simple, yet take care of those folks that have different needs? … It’s complex to fix it.” Rep. Jeff Thompson, who chairs the State and Local Tax Review Task Force, told the Capital Chronicle upon adjournment.

Thompson in April warned of impending jumps in agricultural land property taxes. And on Tuesday the Indiana Farm Bureau said its members “need an intervention.”

Indiana uses recent sales to assess most property types, but farmland is different.

The Department of Local Government Finance instead determines a “base rate,” a rolling average with six years of capitalized net cash rent and net operating income. DLGF drops the highest value of the six and averages the remaining five years.

But Indiana Farm Bureau’s advocacy lead, Katrina Hall, said the years-long delay in the formula data means farm income per acre is dropping even as the base rate grows.

That delay will keep hitting farmers.

As previous years’ values roll off in the calculation, Hall said, “We’re not going to have the low ones to moderate the increase. So it’s going to go high and stay there.”

While the formula does help farmers, Hall continued, it’s still volatile because the net operating income calculation relies heavily on corn and soybean prices.

Rep. Ed DeLaney, D-Indianapolis, said he was troubled by the contrast between the base value — $2,280 per acre in 2025 — and what farmland actually sells for.

Hall noted that farmers “don’t get much of any” benefit from the state’s tax caps and can’t access tax relief mechanisms that other property owners can.

Rep. Jack Jordan, R-Bremen, defended agricultural landowners.

Local Units Weigh In

Groups representing Hoosier municipalities and counties, meanwhile, acknowledged rising tax bills but detailed their members’ challenges.

The Association of Indiana Counties’ Ryan Hoff expressed dissatisfaction with limits on how much money local units of government can raise in property taxes.

Indiana caps that amount — the maximum levy — and dictates how much that cap can rise each year via the maximum levy growth quotient. The quotient uses the statewide rate of average, non-farm personal income growth over the last six years.

Hoff said that, while the income-based growth quotient may reflect taxpayers’ ability to pay, it doesn’t account for service costs. That’s unless a unit appeals its cap based on annexation or extreme assessed value growth.

Lawmakers, including Thompson, sought to crack down on three-year assessed value growth, the most popular exception to the state’s limits, last session.

Hoff called the use of such exceptions “part of the manner in which we’re forced to fight over property tax dollars.”

Hoff told lawmakers that, if they planned to reform the growth quotient, the new system should still consider rising service costs in some way.

Jordan, however, critiqued local units.

Campbell Ricci of Accelerate Indiana Municipalities said local income tax is controlled at the county level, so interested cities and towns can’t make changes unilaterally. He pushed to give individual municipalities that power.

He additionally defended municipalities as more likely to hit the caps and lose out on property tax revenue, and asked lawmakers not to make debt service controls too burdensome.

Schools Lay Out Challenges

Organizations representing school boards, business officials and superintendents — alongside small and rural schools — said the state’s current property tax system has some struggles.

In an analysis of property tax funding presented at the meeting, Policy Analytics found that growing districts and districts with high tax cap losses spend more on non-discretionary insurance, transportation and utility expenses than they receive in operation fund levies.

Statewide, schools spend about 75% of operation fund money on those expenses, leaving them with about 25% to use on HVAC systems, parking lots and any other operational expenses. Districts with fewer than 2,000 students fared better than average, with non-discretionary expenses consuming about 67% of the money.

Growing districts, however, spent 87% on those necessary expenses, and districts with high tax cap losses spent the equivalent of 114% of their operation funds on such expenses.

The report also found that growing districts and districts with high tax cap losses turn to debt to fund students similarly.

Statewide, schools got $3,324 per student on average out of their operations and debt levies.

“Small districts do a little better … in their operations funds, so you can see their bar for debt decreases. Growing districts receive quite a bit less than the statewide figures, so they make up the gap with debt,” said Scott Bowling, executive director for the Indiana Association of School Business Officials.

Bowling asked lawmakers for simplicity, but when asked for recommendations, said one-size-fits-all won’t work: “rules that might look really good for one community might seriously hamper a different community.”