Bill seeks to address local fire district's revenue concerns

Jan. 18—FLOYD COUNTY — A local lawmaker is introducing legislation to address revenue concerns related to the recent merger of Floyd County fire districts.

State Rep. Ed Clere, R-New Albany, authored House Bill 1134, which seeks to update the distribution of Local Income Tax (LIT) revenue for merged taxing units.

The bill would directly benefit the Highlander Fire Protection District, which went into effect on Jan. 1 following the merger of the Greenville and Lafayette fire districts.

State Rep. Rita Fleming, D-Jeffersonville, State Rep. Karen Engleman, R-Georgetown and Jack Jordan, R-Bremen, are the bill's co-authors.

On Wednesday, county officials and representatives from the Highlander Fire Protection District testified in support of House Bill 1134 before the House Ways and Means Committee.

"The bill was well-received, and I am looking forward to getting a vote on it here in the next two weeks," Clere said.

After the House votes on the legislation, it will be referred to the Senate for a vote.

The bill would modify the LIT distribution after the merger of two existing civil taxing units or school corporations, allowing merged units to receive miscellaneous revenue in their first year.

In the first year, the Highlander district is ineligible to receive nearly $1 million in miscellaneous revenue from Local Income Taxes (LIT) that the two separate districts would have received, leading the newly merged district to use cash reserves to support its 2024 budget.

The miscellaneous revenue that would have been directed to the Lafayette and Greenville fire districts is being distributed to the remaining taxing units in Floyd County.

Under the proposed legislation, the Highlander district would receive revenue in 2025 equaling the combined LIT distribution that the Greenville and Lafayette fire districts would have received in 2024 if the merger had not occurred.

Before the merger of the Lafayette and Greenville districts, the miscellaneous revenue made up about a third of the revenue stream for each unit's budget outside of property taxes, according to Highlander Fire Chief Jeremy Klein.

He was among the local leaders to testify in support of the legislation in Indianapolis.

"Over the last decade, the state has pushed for smaller units of government to consider merging so there are not so many units of government...," Klein said. "Essentially if you do that, you're kind of getting penalized because you're losing funding, so therefore you have to spend your cash balance in order to support your revenue the first year.

This prevents the fire district from using those cash balances to upgrade outdated fire apparatus and equipment.

"They had to use cash reserves from the two districts that merged to fund Highlander's first-year budget, and that's money that should be going to purchasing apparatus and equipment and gear that has potential life-and-death consequences for both the firefighters and the people they serve," Clere said.

Floyd County Councilman Brad Striegel, one of the county officials who testified at Wednesday's hearing, said because fire protection is a "vital public service, every dollar counts."

"So a fire district would either have to spend their cash on hand, go out and take out a tax anticipation loan or they would have to ask for more money on the taxpayers just to offset what I believe is an unintended consequence in the state law," Striegel said.

Floyd County Commissioner John Schellenberger testified at Wednesday's hearing in favor of the bill. He noted that his fellow commissioners, Al Knable and Jason Sharp, have also voiced support for the legislation.

He said he was pleased with the response to the bill at the committee hearing.

The legislation's "claw-back clause" would allow the Highlander district to be reimbursed for revenue making up for what it lost in 2024.

"It won't hurt any other unit of local government," Clere said. "It simply takes back the windfalls that other units are receiving as a result of the quirk in statute."

He appreciates that the fire district took a "conservative approach" and did not request a higher tax levy to make up for the revenue loss, he said.

Schellenberger said the fire district has been "frugal and thrifty" in addressing the funding gap, including working with the Indiana Department of Local Government Finance and financial consultant Reuben Cummings.

Clere said if passed, the legislation would have an immediate effect on the Highlander Fire Protection District, and it would also have larger implications throughout the state.

"It will ensure that other units of local government that wish to merge don't face the same disincentive or barrier in the future," he said. "This legislation arose from the situation in Floyd County, but it will apply statewide, not only to fire protection districts but also to other units of local government, including school corporations, townships and others."

Striegel said that despite the challenges, he feels the consolidation of the two Floyd County fire districts was the right step, and he appreciates lawmakers' efforts to seek solutions to the financial obstacles to the merger of local units.

"Floyd County elected officials recognize this as a bit of a challenge, but because we believe in smart, efficient government, we chose to merge the fire department into Highlander even in spite of the hardship," he said.

"We believe in order to encourage other local units of government to consolidate in the future, this legislation will accomplish more efficiency in government."

Schellenberger said the move to the Highlander Fire Protection District was an "easy transition."

"They made sure all the properties and all the bank accounts were properly identified, so come Jan. 1, it was just a smooth transition," he said.

Clere described the merger of the two fire districts as "a major positive step for those townships and for Floyd County."

"There's no need to diminish it by leaving them strapped for funds," Clere said.