Officials get primer on options

Bonds, build-operate-transfer agreements and property taxes.

Jay County officials learned about various options for project financing during a joint session Wednesday.

Jason Semler of consulting firm Baker Tilly explained different avenues of funding available to Jay County Commissioners and Jay County Council.

Breaking down property taxes at the base level, Semler explained a few key terms. Gross assessed value of the tax base is defined as the value before any deductions of real and personal property. Net assessed value of the tax base, in contrast, is the net value after deductions and abatements of real and personal property.

Property tax levies, he added, are funds generated by applying the tax rate to each $100 of the net assessed value.

Semler talked about the maximum property tax levy — the maximum amount of property tax dollars that may be levied in a budget year — and the maximum levy growth quotient, which is an annual levy growth factor used statewide and based on a six-year average of non-farm personal income.

He explained circuit breaker tax credits, which limit a taxpayer’s total property tax liability to a fixed percentage of the gross assessed value of the taxable property before deductions. 

Looking at Jay County’s 2024 budget, the county had $7.72 million in certified property tax levies. Its circuit breaker “losses” — dollars not paid by taxpayers because of the limits set in circuit breaker tax credits — came in $184,714, which Semler noted is a low amount comparatively.

Municipal bonds — a debt security issued by governmental units to raise funding — are used to finance capital projects, such as road work, wastewater or water systems, schools, jails or emergency responder stations.

Semler noted there are four types of bonds — property tax bonds, lease bonds, bond anticipation notes and revenue bonds.

Property tax bonds involve adding a debt service property tax levy onto tax rolls to cover bond payments. 

However, they are subject to debt limits. (In Indiana, counties’ constitutional debt limit is one-third of 2% of the unit’s certified net assessed value.)  

The county has an ongoing property tax bond for construction work completed on Jay County Jail several years ago, added Semler.

Lease rental bonds are issued by a separate entity such as a building corporation or redevelopment commission that pays for the capital project. It’s then leased to the governmental unit when ready for use, with the governmental agency making “lease rental payments” to repay bonds. Those funds may be pulled from property taxes, income taxes or other available dollars.

Bond anticipation notes are short-term debts issued while waiting for longer-term financing.

Revenue bonds are payable from a select number of revenues, including local income taxes, tax increment financing and other taxes as well as user fees, such as fees for wastewater, water or parking.

Semler also mentioned different procurement methods when looking into building projects. One of those methods includes public-private “build-operate-transfer” agreements, which are used for construction, operation or maintenance of a public facility. 

Build-operate-transfer agreements allow more control in choosing an offer, allow an opportunity to negotiate offers and keep project responsibilities within one entity, he explained. Guaranteed maximum prices established in those agreements also help to prevent unexpected increases in cost.

Semler shared an illustrative version of what property tax bonds could look like for projects discussed in recent years, estimating at $13.815 million total if pursued.

“If we were to do that bond, that $13 million bond, and fund it all from property taxes, I’m showing the tax rate would go up from 5 cents as it is now to almost 10 cents in 2026,” he explained.

That tax rate would decrease to about 8 cents after other outstanding bonds are paid off in 2028.