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Citations Affected: IC 6-1.1; noncode.

Effective: January 1, 2012 (retroactive); July 1, 2012.

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Charbonneau , Kenley, Miller, Head

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    January 9, 2012, read first time and referred to Committee on Tax and Fiscal Policy.
    January 19, 2012, amended, reported favorably _ Do Pass.
    January 23, 2012, read second time, amended, ordered engrossed.

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Digest Continued

board: (1) Acquire real property for school building purposes. (2) Construct new school buildings or remodel or renovate existing school buildings. (3) Incur a contractual obligation (except an employment contract for a new employee whose employment replaces the employment of a former employee) that requires an expenditure of more than $10,000. (4) Purchase or enter into an agreement to purchase personal property at a cost of more than $10,000. (5) Adopt or advertise a budget, tax levy, or tax rate for an ensuing budget year. Specifies that if the authority otherwise exists a school corporation may receive a loan with interest from the counter-cyclical revenue and economic stabilization (state rainy day) fund or the common school fund or an authorization to use unobligated reserves or other balances in other funds or to make fund to fund transfers. Reduces the number of members on the board to five: (1) the director of the office of management and budget; (2) the commissioner of the department of local government finance; (3) the state examiner of the state board of accounts; (4) the superintendent of public instruction; and (5) an individual appointed by the chair of the legislative council. Repeals obsolete provisions of the distressed unit appeals board statute.

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PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts between statutes enacted by the 2011 Regular Session of the General Assembly.

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    A BILL FOR AN ACT to amend the Indiana Code concerning taxation.

SOURCE: IC 6-1.1-20.3-2; (12)SB0355.2.1. -->     SECTION 1. IC 6-1.1-20.3-2, AS AMENDED BY P.L.146-2008, SECTION 202, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 2. As used in this chapter, "distressed political subdivision" means a political subdivision that expects to have the political subdivision's property tax collections reduced by at least five percent (5%) in a calendar year as a result of the application of the credit under IC 6-1.1-20.6 for that calendar year. designated as a distressed political subdivision by the board under section 6.5 of this chapter.

SOURCE: IC 6-1.1-20.3-4; (12)SB0355.2.2. -->     SECTION 2. IC 6-1.1-20.3-4, AS AMENDED BY P.L.146-2008, SECTION 203, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 4. (a) The distressed unit appeal board is established.
    (b) The distressed unit appeal board consists of the following members:
        (1) The director of the office of management and budget or the director's designee. The director or the director's designee shall

serve as chairperson of the distressed unit appeal board.
        (2) The commissioner of the department of local government finance or the commissioner's designee.
        (3) The commissioner of the department of state revenue or the commissioner's designee.
        (4) (3) The state examiner of the state board of accounts or the state examiner's designee.
        (5) The following members appointed by the governor:
            (A) One (1) member appointed from nominees submitted by the Indiana Association of Cities and Towns.
            (B) One (1) member appointed from nominees submitted by the Association of Indiana Counties.
            (C) One (1) member appointed from nominees submitted by the Indiana Association of School Superintendents.
        A member nominated and appointed under this subdivision must be an elected official of a political subdivision.
        (6) One (1) member appointed by the governor (in addition to members appointed under subdivision (5)).
        (7) One (1) member appointed by the speaker of the house of representatives. A member appointed under this subdivision serves a term of four (4) years.
         (4) The state superintendent of public instruction or the superintendent's designee.
        (5) An individual appointed by the chairperson of the legislative council.
    (c) The members appointed under subsection (b)(5) and subsection (b)(6) serve at the pleasure of the governor.
    (d) (c) Each member of the commission is entitled to reimbursement for:
        (1) traveling expenses as provided under IC 4-13-1-4; and
        (2) other expenses actually incurred in connection with the member's duties as provided in the state policies and procedures established by the Indiana department of administration and approved by the budget agency.

SOURCE: IC 6-1.1-20.3-6; (12)SB0355.2.3. -->     SECTION 3. IC 6-1.1-20.3-6, AS AMENDED BY P.L.146-2008, SECTION 205, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 6. (a) For property taxes first due and payable in 2008 and thereafter, The fiscal body and the executive of a distressed political subdivision may petition the board for relief as authorized under this chapter from the application of the credit under IC 6-1.1-20.6 for a calendar year. political subdivision may jointly file a petition with the board seeking to have the political

subdivision designated as a distressed political subdivision under this chapter.
    (b) A petition under subsection (a) must include a proposed financial plan for the distressed political subdivision. The proposed financial plan must include the following:
        (1) Proposed budgets that would enable the distressed political subdivision to cease being a distressed political subdivision.
        (2) Proposed efficiencies, consolidations, cost reductions, uses of alternative or additional revenues, or other actions that would enable the distressed political subdivision to cease being a distressed political subdivision.
        (3) Proposed increases, if any, in the percentage thresholds (specified as a percentage of gross assessed value) at which the credit under IC 6-1.1-20.6 will apply, including any varying percentages for different classes of property.
        (4) Proposed reductions, if any, to the credits under IC 6-1.1-20.6 (by percentages), including any varying percentage reductions for different classes of property.
    (c) (b) The board may adopt procedures governing the timing and required content of a petition under subsection (a).

SOURCE: IC 6-1.1-20.3-6.5; (12)SB0355.2.4. -->     SECTION 4. IC 6-1.1-20.3-6.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 6.5. (a) After the board receives a petition concerning a political subdivision under section 6 of this chapter, the board may designate the political subdivision as a distressed political subdivision if at least one (1) of the following conditions applies to the political subdivision:
        (1) The political subdivision has defaulted in payment of principal or interest on any of its bonds or notes.
        (2) The political subdivision has missed a payroll for thirty (30) days or two (2) consecutive payrolls.
        (3) The political subdivision has failed to make required payments to judgment creditors for sixty (60) days beyond the date of the recording of the judgment.
        (4) The political subdivision, for at least thirty (30) days beyond the due date, has failed to do any of the following:
            (A) Forward taxes withheld on the incomes of employees.
            (B) Failed to transfer employer or employee contributions due under the Federal Insurance Contributions Act (FICA).
            (C) Failed to deposit the political subdivision's minimum obligation payment to a pension fund.

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        (5) The political subdivision has accumulated a deficit equal to eight percent (8%) or more of the political subdivision's revenues. For purposes of this subdivision, "deficit" means a negative fund balance calculated as a percentage of revenues at the end of a budget year for any governmental or proprietary fund. The calculation must be presented on an accrual basis according to generally accepted accounting principles.
        (6) The political subdivision has sought to negotiate a resolution or an adjustment of claims that in the aggregate:
            (A) exceed thirty percent (30%) of the political subdivision's anticipated annual revenues; and
            (B) are ninety (90) days or more past due.
        (7) The political subdivision has interfund loans for the benefit of the same fund carried over year end for two (2) successive years.
        (8) As a result of granting the property tax credits under IC 6-1.1-20.6, the political subdivision has had to reduce its levy for all funds, except its debt service funds, by at least seventy-five percent (75%) regarding the year for which the latest certified levies have been determined. This percentage shall be computed as follows:
            (A) Compute the amount of credits granted under IC 6-1.1-20.6 against the political subdivision's combined levy for all of its funds.
            (B) Compute the political subdivision's combined levy for all of its funds, except debt service funds.
            (C) Divide the amount computed under clause (A) by the amount computed under clause (B) and express the amount as a percentage.
        (9) The political subdivision has had two (2) successive referenda fail that would have resulted in property taxes that would not be considered for purposes of the credit for excessive property taxes under IC 6-1.1-20.6.
        (10) In the case of a school corporation, the school corporation has had two (2) successive general fund referenda fail.
The board may consider whether a political subdivision has fully exercised all the local options available to the political subdivision, such as a local option income tax or a local option income tax rate increase or, in the case of a school corporation, an operating referendum.

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    (b) If the board designates a political subdivision as distressed under subsection (a), the board shall review the designation annually to determine if the distressed political subdivision meets at least one (1) of the conditions listed in subsection (a).
    (c) If the board designates a political subdivision as a distressed political subdivision under subsection (a), the board shall immediately notify:
        (1) the treasurer of state; and
        (2) the county auditor and county treasurer of each county in which the distressed political subdivision is wholly or partially located;
that the board has designated the political subdivision as a distressed political subdivision.

SOURCE: IC 6-1.1-20.3-7; (12)SB0355.2.5. -->     SECTION 5. IC 6-1.1-20.3-7 IS REPEALED [EFFECTIVE JULY 1, 2012]. Sec. 7. (a) If the fiscal body of a distressed political subdivision submits a petition under section 6 of this chapter, the board shall review the petition and assist in establishing a financial plan for the distressed political subdivision.
    (b) In reviewing a petition submitted under section 6 of this chapter, the board:
        (1) shall consider:
            (A) the proposed financial plan;
            (B) comparisons to similarly situated political subdivisions;
            (C) the existing revenue and expenditures of political subdivisions in the county; and
            (D) any other factor considered relevant by the board; and
        (2) may establish subcommittees or temporarily appoint nonvoting members to the board to assist in the review.

SOURCE: IC 6-1.1-20.3-7.5; (12)SB0355.2.6. -->     SECTION 6. IC 6-1.1-20.3-7.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 7.5. (a) If the board designates a political subdivision as a distressed political subdivision under section 6.5 of this chapter, the board shall appoint an emergency manager for the distressed political subdivision. An emergency manager serves at the pleasure of the board.
    (b) The chairperson of the board shall oversee the activities of an emergency manager.
    (c) The distressed political subdivision shall pay the emergency manager's compensation and reimburse the emergency fiscal manager for actual and necessary expenses.

SOURCE: IC 6-1.1-20.3-8; (12)SB0355.2.7. -->     SECTION 7. IC 6-1.1-20.3-8 IS REPEALED [EFFECTIVE JULY 1, 2012]. Sec. 8. (a) The board may authorize relief as provided in

subsection (b) from the application of the credit under IC 6-1.1-20.6 for a calendar year if the governing body of each political subdivision in the county that is affected by the financial plan has adopted a resolution agreeing to the terms of the financial plan.
    (b) If the conditions of subsection (a) are satisfied, the board may, notwithstanding IC 6-1.1-20.6, do any of the following:
        (1) Increase the percentage thresholds (specified as a percentage of gross assessed value) at which the credit under IC 6-1.1-20.6 applies to a person's property tax liability in the political subdivision.
        (2) Provide for percentage reductions to credits otherwise provided under IC 6-1.1-20.6 in the political subdivision.
        (3) Provide that some or all of the property taxes that:
            (A) are being imposed to pay bonds, leases, or other debt obligations; and
            (B) would otherwise be included in the calculation of the credit under IC 6-1.1-20.6 in the political subdivision;
        shall not be included for purposes of calculating a person's credit under IC 6-1.1-20.6.
    (c) If the board provides relief described in subsection (b), the board shall conduct audits and reviews as necessary to determine whether the affected political subdivision is abiding by the terms of the financial plan agreed to under subsection (a).

SOURCE: IC 6-1.1-20.3-8.5; (12)SB0355.2.8. -->     SECTION 8. IC 6-1.1-20.3-8.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 8.5. (a) Notwithstanding any other law, an emergency manager of a distressed political subdivision appointed under section 7.5 of this chapter shall do the following:
        (1) Assume and exercise the authority and responsibilities of both the executive and the fiscal body of the political subdivision concerning the adoption, amendment, and enforcement of ordinances and resolutions relating to or affecting the fiscal stability of the political subdivision. However, the emergency manager does not have the power to impose taxes or fees in addition to the taxes or fees authorized by the political subdivision before the political subdivision was designated a distressed political subdivision.
        (2) Review the political subdivision's budget.
        (3) Review salaries of the political subdivision's employees.
        (4) Conduct a financial and compliance audit of the internal operations of the political subdivision.

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        (5) Develop a written financial plan in consultation with the officials of the political subdivision not later than six (6) months after appointment.
        (6) Develop a plan for paying all the political subdivision's outstanding obligations.
        (7) Review existing labor contracts.
        (8) Adopt a budget for the political subdivision for each calendar or fiscal year, as applicable, that the political subdivision remains a distressed political subdivision.
        (9) Review payrolls and other claims against the political subdivision before payment.
        (10) Make, approve, or disapprove the following:
            (A) A contract.
            (B) An expenditure.
            (C) A loan.
            (D) The creation of any new position.
            (E) The filling of any vacant position.
        (11) Submit a written report to the board every three (3) months describing the work that has been done to remove the political subdivision from distressed status.
        (12) Petition the board to terminate a political subdivision's status as a distressed political subdivision when the conditions found in section 6.5 of this chapter are no longer applicable to the political subdivision.
    (b) An emergency manager of a distressed political subdivision appointed under section 7.5 of this chapter may do the following:
        (1) Renegotiate existing labor contracts and act as an agent of the political subdivision in collective bargaining.
        (2) Reduce or suspend salaries of the political subdivision's employees.
        (3) Enter into agreements with other political subdivisions for the provision of services.
        (4) In the case of a school corporation, and to the extent the authority exists outside this chapter, an emergency manager may do one (1) or more of the following:
            (A) Enter into a contract with the treasurer of state to provide a loan with interest from the counter-cyclical revenue and economic stabilization fund (IC 4-10-18) or the common school fund of the state (IC 20-49-3) on the terms determined by the emergency manager and the treasurer of state. The treasurer of state is authorized to make the loan to the extent money is available in the fund.

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            (B) Authorize the use of unobligated reserves or other balances in a construction fund, sinking fund, bond fund, or debt service fund, to the extent permitted under the school corporation's agreements with the holders of any bonds, leases, or other obligations of the school corporation or a holding company for the school corporation.
            (C) Authorize fund to fund transfers from and to any statutory fund.
    (c) Except as provided in section 13(c) of this chapter, an emergency manager of a distressed political subdivision retains the powers and duties described in subsections (a) and (b) until:
        (1) the emergency manager resigns or dies;
        (2) the board removes the emergency manager; or
        (3) the political subdivision's status as a distressed political subdivision is terminated under section 13(b) of this chapter.

SOURCE: IC 6-1.1-20.3-8.7; (12)SB0355.2.9. -->     SECTION 9. IC 6-1.1-20.3-8.7 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 8.7. A school corporation that receives emergency financial relief may not do any of the following without the approval of the board during the period before the board terminates the school corporation's status as a distressed school corporation:
        (1) Acquire real property for school building purposes.
        (2) Construct new school buildings or remodel or renovate existing school buildings.
        (3) Incur a contractual obligation (except an employment contract for a new employee whose employment replaces the employment of a former employee) that requires an expenditure of more than ten thousand dollars ($10,000).
        (4) Purchase or enter into an agreement to purchase personal property at a cost of more than ten thousand dollars ($10,000).
        (5) Adopt or advertise a budget, tax levy, or tax rate for an ensuing budget year.

SOURCE: IC 6-1.1-20.3-10; (12)SB0355.2.10. -->     SECTION 10. IC 6-1.1-20.3-10, AS ADDED BY P.L.146-2008, SECTION 209, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 10. A distressed political subdivision may petition the tax court for judicial review of a final determination of the board under section 6.5 of this chapter. The action must be taken to the tax court under IC 6-1.1-15 in the same manner that an action is taken to appeal a final determination of the

Indiana board of tax review. The petition must be filed in the tax court not more than forty-five (45) days after the board enters its final determination.

SOURCE: IC 6-1.1-20.3-13; (12)SB0355.2.11. -->     SECTION 11. IC 6-1.1-20.3-13 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 13 (a) If:
        (1) an emergency manager of a distressed political subdivision;
        (2) the petitioner who moved for designation of the political subdivision as a distressed political subdivision under section 6 of this chapter; or
         (3) a school corporation that has a new:
            (A) superintendent employed; or
            (B) member elected or appointed to its governing body;
        during the time a school corporation is a distressed political subdivision;
files a petition with the board for termination of the political subdivision's status as a distressed political subdivision, the board shall conduct a public hearing on the question of whether to terminate the political subdivision's status as a distressed political subdivision.
    (b) The board shall terminate the political subdivision's status as a distressed political subdivision if the board finds that the conditions found in section 6.5 of this chapter are no longer applicable to the political subdivision.
    (c) Notwithstanding any other section of this chapter, not later than ninety (90) days after taking office, a new executive of a distressed political subdivision may petition the board for suspension of the political subdivision's distressed status. The executive must include in its petition a written plan to resolve the applicable issues described in section 6.5 of this chapter. If the board approves the executive's written plan, the board may suspend the political subdivision's distressed status for one hundred eighty (180) days. Suspension under this chapter terminates automatically upon expiration of the one hundred eighty (180) day period. The board may consider a petition to terminate the political subdivision's distressed status during a period of suspension.

SOURCE: ; (12)SB0355.2.12. -->     SECTION 12. [EFFECTIVE JANUARY 1, 2012 (RETROACTIVE)] (a) Notwithstanding this act, the final determinations of the distressed unit appeal board made before January 1, 2012, remain in effect until the final settlement of the

2011 Lake County property tax bills.
    (b) This SECTION expires December 31, 2013.

SOURCE: ; (12)SB0355.2.13. -->     SECTION 13. An emergency is declared for this act.