Evansville Mayor Lloyd Winnecke and Indianapolis Mayor Greg Ballard, both Republicans, are critical of the proposed business personal property tax repeal and are demanding details from Gov. Mike Pence and legislative leaders. (HPI Photo by Brian A. Howey)
Evansville Mayor Lloyd Winnecke and Indianapolis Mayor Greg Ballard, both Republicans, are critical of the proposed business personal property tax repeal and are demanding details from Gov. Mike Pence and legislative leaders. (HPI Photo by Brian A. Howey)

INDIANAPOLIS - INDIANAPOLIS - Indiana Gov. Mike Pence, who won office with just 49% of the vote two years ago, is in a political jam of his own making.

On a frosty Tuesday morning, more than 50 mayors - a majority of them Republican - jammed a conference room at the Hyatt and unleashed a rebuke on the proposed business personal property tax repeal, which is the governor's top stated legislative priority.

Hours later, Pence announced that he will seek full replacement revenue for local governments from the state after meeting with mayors Lloyd Winnecke of Evansville, Greg Goodnight of Kokomo, Duke Bennett of Terre Haute, Joe Thallemer of Warsaw, Peter Buttigieg of South Bend, Huck Lewis of Lebanon and Tom Henry of Fort Wayne.

“After listening to local communities across our state, I have informed legislative leaders that I am open to full state replacement revenue for local governments to cover the cost of eliminating the business personal property tax on small businesses with less than $25,000 in equipment, as proposed in Senate Bill 1," Pence said in a statement. "This would ensure that any reform of this tax does not unduly burden local governments or shift the cost of this tax onto hardworking Hoosiers. This reform, along with affording counties the option of ending the tax on new equipment as proposed in House Bill 1001, would make our communities and our state more attractive for the kind of investment that will create jobs for Hoosiers. In the end, Hoosiers and our local communities will benefit as business grow and companies bring new jobs to our state."

Pence added, “I look forward to working together House and Senate leaders, as well as local officials, as we continue to advance these important reforms.”

Just five days before, Gov. Pence danced around repeated questions from reporters on what he meant by "undue harm" to municipalities that could lose $1 billion in revenue and increase circuit-breaker losses by another $375 million. The mayors view this repeal in a long line of revenue erosion from the constitutional property tax caps and the repeal of inventory and death taxes.

Republican Mayor Greg Ballard of Indianapolis and Winnecke have become the face of what is sinking into an inter-GOP feud between the Statehouse and dozens of city halls across Indiana.

"I have been a vocal advocate for finding efficiencies and creative cost cutting measures in local government," said Ballard. "However, current proposals to eliminate even a portion of the business personal property tax do not take into account the impact additional revenue cuts will have on public safety, schools and the many other vital services local governments provide." Indianapolis would lose $25.6 million, including $7.7 for police and fire protection, $40.7 million to schools. "Eliminating the tax will result in cuts to schools, police, fire and parks."

Ballard added, "If this proposed tax is decreased for corporations, it will become the governor's tax increase on our citizens."

Evansville Mayor Lloyd Winnecke noted that while neither SB1 and HB1001 is a "total elimination" of the tax, he described both as "the first step in a total elimination." He said of the recent Evansville "visionary process" for the city's future, some 1,700 citizens have participated "and the top of each bucket all are related to quality of life.

But something else is happening beyond the big cities that tend to vote Democratic despite the fact that Ballard, Winnecke and others like Terre Haute Mayor Duke Bennett are Republicans.

Resolutions against the tax are passing city councils in Republican bastions such as Peru, Portland, Munster, Warsaw, Fairmount, Noblesville, Wakarusa, Garrett, Linton, Plainfield, Lebanon and Monticello. County councils have passed resolutions against the repeal in Wabash, Morgan and Hendricks counties. In Noble County, municipalities and county government fashioned a joint resolution against the repeal. This winter of discontent is festering in the heart of the Hoosier Republican base.

Republican Jasper Mayor Terry Seitz said his city could lose $1.2 million annually, 17% of its budget. “I’m not saying that it isn’t something that businesses wouldn’t want or take advantage of,” he said. “But, as it is presented, as it was pitched, I’m pitching back that this is how it will impact us.” In nearby Huntingburg, Republican Mayor Denny Spinner told the Jasper Herald, “We cannot afford to continue to have their revenue streams limited and reduced. The property tax caps have had a definite effect on our income structure. Losing another source of revenue would cause us to have to take some serious looks at reducing services or making cuts in some other areas that we really can’t afford.”

In Wakarusa, an extremely conservative town in southern Elkhart County's Amish country, the town board's Feb. 4 resolution noted, "None of the proposals being considered by the Governor or Indiana General Assembly contemplate any replacement revenues for those revenues they are eliminating via the full or partial elimination of the business personal property tax." It resolved, "that we oppose any proposal to eliminate all or any portion of the business personal property tax without a corresponding replacement revenue stream implemented by the State of Indiana."

Wakarsua stands to lose $132,332 if the tax is repealed, while Elkhart County would lose $60.9 million, or 27.5% of its property tax revenue.

Scanning through the 2012 election results, Pence carried Elkhart County with 57.9%, DuBois County with 59.6%, Hendricks County with 61.2%, Morgan County with 60.8% and Wabash County with 60.4%. He won Vanderburgh County with 51.2%. In Miami County, Pence won there with 54.5% while Gregg polled just 39.4% with Libertarian Rupert Boneham picking up 61.%

Essentially, not only is Gov. Pence alienating himself from the urban bases he has, but also in the doughnut counties and the most conservative areas of the state that essentially prevented what would have been a stunning upset to Democrat John Gregg. The Indiana Association of Counties estimates that 80% of county elected officials are Republican, and more than 60% of its mayors belong to the GOP.

Ballard pressed Pence and legislative leaders for details. "I urge lawmakers to put forward language that is: A statewide policy, revenue neutral with replacement revenue coming from state sources, and not a shift of this business tax to individual Hoosier property taxpayers," Ballard said. "It's important that any changes to our state's tax structure and economic development strategies take into account the need to build communities that attract and retain the best and brightest workforce."

What is becoming evident is that Pence and legislative leaders created their top issue without much thought into the impact on local governments and replacement revenue. This lack of preparation has resulted into a political firestorm within the GOP.

Pence has been evasive and coy about keeping the tax repeal revenue neutral. "Look," Pence said last Thursday in a coffee with reporters, "we've been in contact and discussions not only with members of the General Assembly but I've been meeting and talking with mayors from around the state of Indiana and I want to say, I respect their opinions and understand their concerns."

Pence was repeatedly asked about his phrase "undue burden" on local governments. "Let me be clear," Pence said for a third time, "I want to make it possible for our communities to be more attractive for investment to put people to work and be able to meet the expenses of the essential services that they provide to their citizens. Now, I know you all want me to talk about detail, I know that, OK? But we're involved in discussions, negotiations, there will be compromise."

Compromise, and a potential political price to pay.