The computer software problem during the recent Monroe County reassessment actually will cost Monroe County taxing units $8.14 million, $2 million more than first thought.

The projected $6.15 million shortfall from the assessing error also will produce a decrease of just under $2 million in the property tax replacement funds that local government units and schools get from the state.

That will increase the need for the Monroe County Community School Corp. to borrow millions to keep its head above water.

And it means that in 2004, property taxpayers will have to pay off any loans in the form of higher property taxes.

MCCSC is the biggest victim of the assessment error. Of a general fund operating budget of about $59 million for 2003, the tax loss will be $1.94 million, with a total loss of $3.4 million when the property tax receipts for the MCCSC's transportation, debt service and capital projects funds are added.

MCCSC Treasurer Tim Thrasher said Wednesday it definitely will have to borrow to cover the full $3.4 million property tax loss it faces from the assessment error. It then would recover that and the interest via an excess levy in 2004.

Thrasher says every penny on the MCCSC's property tax rate generates about $450,000 in taxes. So to repay the $3.4 million plus interest would take an increase of about 8 cents for every $100 of a property's assessed value. For a house assessed at $100,000 since the reassessment, that would be a property tax hike of $80.

If the county, city, library and solid waste district all likewise request excess levies, it could amount to a substantial property tax increase for Bloomington city residents next year, because they're in all those taxing districts.

For Monroe County, the loss to a general fund of about $20 million will be about $517,000. Another major fund, the cumulative bridge fund, will lose almost $125,000. And the county's child welfare office will take a $461,000 hit, when it's already facing the prospect of having to borrow this fall to meet costs.

At Tuesday's Monroe County Council meeting, council president Doug Duncan predicted the situation "is not going to affect us" in terms of having to cut county budgets. He said the county has $1.9 million in county income tax revenue in a reserve it can borrow from to cover its property tax shortfall. But he said the county would seek an excess property tax levy for 2004 to replenish that reserve.

For the city of Bloomington, a general fund of about $23 million will lose $1.46 million because of the assessment error, while the parks department will lose $611,000. Total city losses will be in the ballpark of $2.5 million.

"We have not decided on a specific course of action," Bloomington City Controller Tom Guevara said Wednesday.

"I think the least preferable alternative is to borrow and seek an excess levy," he said. "Therefore, we will first look to use (unspent) balances and reduce expenditures before considering outside borrowing.

"Many Bloomington homeowners are undergoing sticker shock this year with regard to their property taxes," Guevara said, "and I think we need to be sensitive to that issue and be very careful about not piling on with an excess levy if it can be avoided."

Every penny on the city property tax rate produces just under $250,000 in taxes. The city could decide to borrow to recover its full tax shortfall this year, and then pay off the loan with an excess levy next year. To repay $2.5 million, it would need an extra 10 cents on the tax rate to do it. And that would be $100 for a house assessed at $100,000.

Among other units, Monroe County Public Library will lose about $361,000 in operating and bond-repaying property taxes. The county solid waste district will lose more than $82,000, and Bloomington Township government, including its poor relief and firefighting budgets, will lose about $60,000.

Taxing units unaffected by the problem are the Richland-Bean Blossom schools, the towns of Ellettsville and Stinesville, and the county's other 10 townships.

However, residents of the R-BB school district, Ellettsville, Stinesville and the various townships still are likely to be somewhat affected in 2004. Countywide units like county government, the library and the solid waste district may well have to borrow at least some money this year to cover their lost property tax revenue from the assessing mistake.

If they do, they'll very likely apply to the state for an excess property tax levy in 2004 to repay the borrowed funds. And an excess property tax levy would mean a tax rate increase and higher property tax bills for everyone.

The assessment problem surfaced publicly Monday when Monroe County Assessor Judy Sharp and county Auditor Barb Clark convened an emergency meeting of officials from the county, MCCSC, Bloomington, Monroe County Public Library and other taxing units to give them some very bad news.

During the recent property reassessment, the properties of two Bloomington businesses, Newt's Marathon and Brinegar Glass Service somehow had been over-assessed by $370 million.

As a result, the taxable assessed value of properties in Bloomington Township, the city, the county and the MCCSC was that amount too high. That meant property tax rates were lower than they should have been.

The mistakes were discovered too late to adjust the 2003 property tax rates so taxing units could collect their full legal property tax levy.

The result will be a combined $6.15 million shortfall in the property taxes those units will get this year.

And when the impact of that reduction in property tax collections is factored into the property tax replacement funds the state pays local governments and schools for property tax relief, that will cost those units another $2 million.

"I still feel sick, absolutely sick," county assessor Judy Sharp said of the problem, which involved a five-year-old error lurking in the county's assessing database.

Hoosier Times

-- Anonymous, May 19, 2003