Municipalities Grapple with Fiscal Choices Amid Property Tax Shifts

Municipalities in Central Indiana are grappling with fiscal choices as property tax revenues drop due to the state's new property tax law. According to Beech Grove Mayor James Coffman, his city will be short about $500,000 in property tax revenue next year, out of a total annual budget of roughly $19-20 million.

Coffman said he and city leaders are still weighing their options as they begin crafting their Fiscal Year 2026 budget. He would prefer to cut expenses relating to capital improvements and equipment purchases rather than laying off employees.

“We really don’t know what to expect, and that’s the scary part,” Coffman said. “So, as I’ve told our employees and our department heads, we have to be realistic. I’m going to be optimistic in the future that everything will be okay, that we find some solutions.”

The property tax law allows all homeowners to claim a property tax credit of up to 10% of their tax bill, to a maximum of $300. Disabled veterans and low-income seniors can claim additional credits. In exchange, the new law allows cities to levy a new local income tax rate of up to 1.2% beginning in 2028.

Anderson Mayor Thomas Broderick said his city will collect $5 million less in property tax revenue in 2028 due to the law, which works out to roughly 10% of his budget. He plans to ask the city council to raise the city's LIT rate to make up for the revenue shortfall.

“There ended up being layoffs, or at least through attrition, not rehiring folks in public safety, as well as our park department, street department, and so forth,” Broderick said. “We don’t want that to happen going forward. So, we’re going to do everything we can to protect our tax base, and to protect our revenue to make sure that our public safety is taken care of the way that it should be, as well as our quality of life.”

Carmel Mayor Sue Finkam expects a $10 million revenue loss in the upcoming budget year. She said, “This year, meaning '26 and '27, are the roughest years. In '28, supposedly, and it could change, we could levy a new income tax. However, in the meantime, we have to figure out how to do with what we have.”

Coffman said the Department of Local Government Finance will have more accurate estimates for municipal governments to work off of when it releases its April 2026 revenue numbers.