Local government officials in many communities are finding it increasingly difficult to fund fire protection with existing levels of revenues and property tax. Establishing a fire territory is an option that can provide a new revenue stream for fire services. The deadline to establish a fire territory pursuant to Indiana Law is March 31 of a given year to levy property taxes in the following year. Prior to establishing a fire territory, participating units are required to hold a minimum of three (3) public hearings and one (1) adoption meeting after January 1 and before April 1. There are key pieces of information that need to be presented at the public hearings including but not limited to: the property tax levy and rate to be imposed by the fire territory, the estimated effect of the fire territory on taxpayers in each of the affected taxing districts, and the estimated impact on local income tax, circuit breakers and other revenues on all other taxing units within the county. It’s recommended that you begin discussions with participating units and prepare a financial impact analysis six months to a year prior to holding the public hearings and adoption.
New legislation passed early in 2023 adds another layer of complexity to the establishment of a fire territory. HEA 1454 provides that Tax Increment Finance (TIF) allocation areas may not capture property tax rates attributable to fire territories established after December 31, 2022, regardless of when the TIF area was created. This change in legislation could result in higher revenues for fire protection territories in cases where all or part of the new fire territory is located within a newly formed or existing TIF allocation area. HEA 1454 allows for a reduction in the amount of TIF allocation to be distributed to the fire territory if the Redevelopment Commission (RDC) determines that it is unable to meet its debt service obligations. A calculation is required to determine the excess of proceeds of the increase of property tax associated with the establishment of the fire territory and will help to determine if debt service supported by TIF can continue to be funded if there is a reduction of property tax related to fire services. The calculation may be made by the RDC in collaboration with the County Auditor and the fire territory and must be submitted to the Department of Local Government Finance (DLGF) to verify accuracy.
Baker Tilly has assisted many local entities with feasibility studies to determine if a fire territory would be advantageous. We understand the nuances, government levy issues, tips to make a new arrangement successful and pitfalls to avoid. If you have questions or need assistance, please contact Paige Sansone at [email protected] or Susan Cowen at [email protected].