TAX NEWS - June 2010

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Indiana Tax: St. Joseph County "Option Dog Tax"

SOUTH BEND — It was a vote not to vote from the St. Joseph County Council Tuesday following a veto from County Commissioners on a controversial plan to change how funding is distributed to the County's Humane Society. The result of it all could end up being a new tax on dog owners.

The "option dog tax" was first authorized by Indiana lawmakers in 2006. It allows a tax of up to $5 per dog, per year, with specific restrictions on taxes for breeders and kennels.

Since its inception, several counties have used the tax to help pay for animal care and control efforts. Among them are Elkhart, Howard and Vanderburg Counties, according to St. Joseph County Humane Society Director Dr. Carol Ecker.

St. Joseph County Council members faced the question of whether to follow suit several years ago, but decided against implementing the tax at that time. But, now, a vote on what Council members thought was an unrelated issue has forced the question to be put back on the table.

A Familiar Issue

In May, Council members voted 6-2 on an ordinance to direct a greater portion of animal licensing fees to the Humane Society of St. Joseph County. It also would allow the agency to keep all revenue from fines. In exchange, County leaders would have reduced the Humane Society's budget by $10,000 per year, allowing that funding to be put back into the County's general fund.

But, County Commissioners unanimously vetoed the ordinance, saying it was in conflict with the new state "option dog tax" statute. Under it, counties are prohibited from implementing licensing systems for dogs without first adopting a "county option dog tax."

St. Joseph County has no dog tax, but does already have a licensing system in place.

That's a problem, said County leaders Tuesday night.

"It means we're not in compliance according to state statue, so obviously we did not have a choice in [sustaining the Commissioners' veto,]" said County Council President Rafael Morton (D).

It's left the council at an "impasse."

"We're not interested in having a dog option tax, obviously," said County Councilman Mike Kruk (D). "But, we want to have the licensing we've had. So, how can we get the licensing, while having to use the statute that's already in place?"

It's a question that needs answering fast.

If the licensing changes aren't passed, or are pulled because of non-compliance with state statutes, funding for the Humane Society could be in jeopardy.

"It's a major concern, as far as funding for the Humane Society," Morton said. "I'm very concerned moving forward with where that money is going to come from."

Funding Concerns

The Humane Society has plans to relocate to a new building next year. Without a fix, those plans could be put in limbo, too.

"The new building hangs in the balance here," said Humane Society Director Dr. Carol Ecker, speaking from an animal hospital in Michigan where she is performing several complicated surgeries this week.

"This is a sort of gray area that needs to be addressed legally, and I hope the legislature will do that," she continued.

So does Morton.

"We'll be meeting with some local state lawmakers to talk over those options," he said.

But, changes could be at least six months or more away.

In the meantime, there is one alternative: enacting the tax.

For Morton, it's a last resort.

"I would not even consider that," he said. "I just...I don't think that's a good idea right now."

Some dog owners we spoke with agree.

"That's going too far. Way too far," said Beverly Lorence, an owner of two standard poodles who lives in unincorporated St. Joseph County.

"We pay a dog license and a lot of money to vets, and we're taxed for everything now. They're using any excuse they can now for taxes, and we can't afford it," Lorence continued.

Asked if knowing that the money would be used to fund the Humane Society would make any difference in her opinion, Lorence thought for a moment.

"It's the principle of it. I do support my Humane Society. I give to it all the time. But, I don't [want to be forced to]. Not in the name of more taxes," she said.

Kruk says he understands that.

"That's not the intent, just to tax more. The intent is to get back to where we are right now with the licensing set up. But, it seems like we have no other way to go about it," Kruk said.

"We've got to do something. We're not in compliance. The [Humane Society] made their plans based on different funding they thought they'd be getting as well as a contract they just signed with the Commissioners. So, we're going to have to more forward on it one way or another," he continued.

He also suggests a change in state law as a permanent solution.

"That would make the whole problem go away," he said.

In the meantime, Kruk says he's exploring another potential loophole.

"It can't be over five dollars a year, but can it just be zero? Can we make it zero dollars a year just to be compliant with the statute? We don't know the answer to that yet," he said.

Also unclear is exactly who would have to vote to enact the tax. Because it's an "option" tax--similar to the local option income tax passed last year--it would likely require of the county's three largest taxing units to sign off on it.

Because South Bend has its own Animal Control, it's unlikely support would come from there. Mishawaka, on the other hand, uses the County's Humane Society, so, all bets could be off there.

Other Council Business

In other business Tuesday, Council members voted to 6-0 to hire three new full time employees in the County Auditor's office, at a cost of $23,500 each, per year, per employee. Total additional expenses would be $91,650 annually--about one-fifth of the Auditor's total current yearly budget.

Because of additional hours worked to achieve bi-annual property tax billing this year, County Auditor Peter Mullen (D) told Council members he stands to lose 592 hours of work in compensation time through this point in the year alone. Continuing without additional help, Mullen said, could put the office weeks behind, with more than 3,000 more homestead exemption forms and reassessments to complete over the next few months.

Each form can take up to an hour, Mullen said.

"Our hands are tied because of the state statute that says we have to pay four percent interest from day one that the appeal is filed, until it's adjudicated," said Morton.

"That right there would cause--in a worst case scenario--some type of offsetting in the money we're going to pay out for these salaries. Potentially, it's even a savings. But, at the worst, it would at least offset what we'd have to pay in interest. For me, that was the biggest reason for the decision to vote yes," he continued.

The new employees will be hired after July 1st.

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