The Johnson County Council passed an ordinance Monday increasing local income taxes with a a .2% Economic Development Income Tax to fund road projects.
Johnson County residents will see a local income tax increase this fall.
The Johnson County Council on Monday passed a local income tax increase to fund a deficit in road funding by a vote of 6-1, with council member Melinda Griesemer voting against it.
The new tax will be a .2% Economic Development Income Tax, or an EDIT. It will increase the total local income tax rate applied to the adjusted gross incomes of county residents from 1.2% to 1.4%. An individual who makes $35,000 per year, for example, will pay about $6 more per month in local income taxes. Over a year, that would be more than $72.
When information about the proposed tax increase was made public in July, it received largely negative backlash from county residents on social media, including on the Daily Journal’s Facebook page where an initial story about the increase was posted.
However, a public hearing was held at Monday evening’s county council meeting, and no members of the public attended to speak on the tax increase.
This tax increase is part of a long-term solution to meet the county’s road funding shortfall. A funding needs report compiled by the Johnson County Highway Department in March found the county will need to pay about $390 million to pay for road improvements over the next several years.
The report concluded that the county is at a crossroads without a solution for road and bridge project funding, so county officials had to come up with an additional funding source. The tax increase, along with reallocating other tax revenue, is the solution the council deemed to be the most viable.
A .2% EDIT is expected to give the county $4 million in additional revenue each year starting in 2023. The tax is set to start collections in October of this year.
Because of caps on property taxes, most counties in Indiana have taken advantage of EDIT as another stream of revenue. Seventy-three counties have imposed an EDIT.
However, the $4 million that would come in each year still would not be enough to fund all the needed road projects needed in Johnson County, officials say. Funding will still have to be pulled from other revenue streams.
The council also plans to repurpose a portion of the revenue from the local income tax, or LIT, that was raised to fund the Johnson County Jail expansion. The Jail LIT, as it is referred to by county officials, was passed in 2019 and increased income taxes in the county by .2% as well. The revenue from that tax is being used to pay off the debt for the jail construction — which will be paid off in 2025 — as well as jail operating expenses and other criminal-justice related expenses.
A current plan on the table includes passing the .2% EDIT increase and moving 50% of the jail operating expenses to jail LIT. Those expenses are currently being funded by the county’s general fund; that will free up over $3.6 million in the general fund in 2023 and over $4 million after 2025 when the jail expansion is paid off.
The council also plans to pull $1.5 million this year and next year from its rainy day fund to get some road projects started.
That still would not fund every need, but would allow for the construction of what have been deemed “priority projects.” Those projects mostly include reconstructing access roads to I-69, particularly Smith Valley Road.
