Vanderburgh County Surveyor Analyzes the Crowe Horwath Financial Analysis of the Consolidation Proposal

The Indiana statute enabling reorganization of local government requires a financial analysis as part of the reorganization plan, and the reorganization committee engaged Crowe Horwath to provide the financial evaluation of their plan. The contract Crowe Horwath signed with the mayor and the county commissioners included specific items in the scope of services. Among those required items are two that may not have been sufficiently addressed.

1. An estimate of the property tax levies and property tax rates for each taxing district affected by the proposed reorganization, based on budget and levy assumptions provided in the reorganization plan.

While Crowe Horwath published their financial report on August 23, 2010, the reorganization committee did not finish their reorganization plan until three months later on November 11, 2010. How can a financial analysis published on 23 August accurately reflect a plan of government reorganization not completed until 11 November?

2. An estimate of cost savings, expenditures, efficiencies, and tax levy reductions that may be accomplished under the plan of reorganization.

Same comment – how can a report published three months ahead of the plan accurately identify any efficiencies, cost savings, expenditures, or tax levy reductions caused by that plan? Furthermore, the plan itself did not identify any efficiencies or cost savings.

Included in the Crowe Horwath report is the following statement: “We have no responsibility to update this report for events and circumstances occurring after the date of this report” which again was August 23, 2010, three months ahead of the final reorganization plan. Is this a case of a cart before a horse?

Also found on page 20 of the Crowe Horwath report is the following statement: “To date, there have been many discussions regarding the opportunity for potential savings based on the reorganization. The majority of these discussions have not yet identified potential cost savings associated with this consolidation” and “(for) the purposes of this report, Crowe (Horwath) has not undertaken a process to identify potential cost savings associated with such efficiencies.” So, did Crowe Horwath fulfill the terms of the contract?

On page 21, the Crowe Horwath report discusses the police chief’s plan of reorganization. However, there is no discussion of Sheriff’s plan even though the reorganization plan incorporates the Sheriff’s plan for merged law enforcement and the Sheriff released his plan within a week of the chief’s. This is just one of several examples of the incompleteness of the plan when the financial analysis was published.

Under whatever the committee’s proposed plan was as of August 23, 2010, Crowe Horwath estimated an increase to real estate taxpayers in the unconsolidated county of $0.28 per $100 valuation. Can anyone tell us today what the increase will be under the proposed final plan? Isn’t that the analysis that the statute requires?

More importantly, will the resulting tax increase exceed the state mandated 1% tax cap? Many county taxpayers really want to know the answer to that one.

The Crowe Horwath report points out that if the reorganization committee truly were concerned about keeping the property tax rates at their current level, the total levy of the General Services District could not exceed $39,942,740. And that would require the identification of $28 million in post-consolidation cost savings, while at the same time maintaining miscellaneous revenues constant by instituting either known efficiencies or new user fees.

Since neither the reorganization plan nor the Crowe Horwath report identified any efficiencies or cost savings, in order to hold the line on property taxes within the General Services District, the only other option is instituting user fees to remove property tax expenditures for certain existing services in the Urban Service District.

Examples of new user fees:
• Sanitation fees for trash collection, such as currently is paid by county residents
• Street light fees for the 14,760 street lights inside the city
• Private property drainage assessments inside the Urban Service District which currently are paid by the City of Evansville

These new user fees in the Urban Service District would increase miscellaneous revenues, thereby significantly decreasing property tax in the Urban Service District while holding the line in the General Service District.

Instead, the reorganization committee opted for a final plan that will significantly raise the tax rate in the General Service District and just slightly lower the tax rate in the Urban Service District at the expense of taxpayers out in the currently unconsolidated county.

In exchange for raising taxes on property currently outside the city limits, the plan threw county residents a bone by proposing to “equalize sewer rates.” While such a small potato may appeal to a few, the council and the commissioners have to ask themselves the following questions:

• What is it about the unconsolidated areas of Vanderburgh County that attracted nearly 20 thousand new residents in the past 20 years while the City of Evansville has lost 10 thousand citizens?
• What attracts new residents to the unincorporated areas in spite of the fact there are no street lights, no free trash collection, no sidewalks, and higher sewer rates?
• And what other nearby communities offer the same attractions as the unconsolidated areas of Vanderburgh County?

Will this plan of reorganization really stop a post-consolidation migration of Vanderburgh County residents to say Warrick County if those residents continue to seek the benefits of living in an unconsolidated jurisdiction? It seems like the reorganization scheme is just buying one census cycle of time at best.

Bill Jeffers
2641 Malibu Drive