Indiana bill would eliminate more than 160 townships

The Indiana House has passed legislation that would eliminate an estimated 164 townships across the state through consolidation.

The bill, House Bill 1315, has moved to the state Senate where it has been referred to the committee on local government.

"There are two bills active right now," said Becca McCuaig, chief legal counsel at Accelerate Indiana Municipalities, formerly the Indiana Association of Cities and Towns. "In HB 1315, the townships would be merged, and functions would be delivered by the municipality or county that they merged into. There's also Senate Bill 270; in that one, townships would merge with townships."

McCuaig said Indiana townships issue bonds to finance projects, particularly for fire equipment or facilities and "general real estate issues."

SB 270 passed the Senate in late January and has been referred to the committee on local government in the House.

"We just went through one of the bigger property tax reforms, and when they went through those discussions? that's definitely part of the impetus, why lawmakers are looking at it now," said Campbell Ricci, policy and financial resources director at AIM.

According to a Feb. 2 fiscal impact statement from the state's Legislative Services Agency, HB1315 would not require townships that operate fire departments to dissolve.

Those facing dissolution would be townships with a population of less than 6,700, or townships with at least 80% of the total township area located within the corporate boundaries of a municipality and 51% of the township's population residing within the municipal corporate boundaries.

According to the text of the bill, townships that meet the criteria for dissolution must adopt a resolution by June 1 designating the municipality or county that will consolidate with the township. Township property, functions, powers and services would be transferred to the designated unit.

When the terms of office of township board members end on December 31, 2027, the fiscal powers and duties of the board members would be transferred to the fiscal body of the designated unit, the bill says.

The property and liabilities of the township would become those of the designated unit. And taxes levied by the designated unit must be sufficient to cover continued payment of debt service incurred by townships before Jan. 1, 2028.

Section 30 of the bill contains two key provisions that read: "Indebtedness that was incurred by the designated unit or township before Jan. 1, 2028 may not be imposed on taxpayers that were not responsible for payment of the indebtedness before January 1, 2028," and "Pension obligations existing as of January 1, 2028 may not be imposed on taxpayers that were not responsible for payment of the pension obligations before Jan. 1, 2028."

Those debts and pensions must be paid by the taxpayers that were responsible for the indebtedness or pension obligations, it says.

That section of the bill "applies to the debt service levy of the designated unit and to the department of local government finance's determination of the new maximum permissible ad valorem property tax levy for the designated unit," according to the bill text.

The lead author of HB 1315, Rep. Alaina Shonkwiler, R-Noblesville, did not respond to multiple requests for comment.

Also under the bill, where part of a township falls outside a municipality, the municipality must create an urban township services district and a rural township services district.

The bill would require the fiscal department of the county to approve budgets, tax rates and tax levies imposed by the municipality in the rural township services district.

McCuaig said AIM is working with legislators on the House and Senate bills because "one of (their) biggest pieces is delivery of services to Hoosiers."

She added, "Municipalities are focused on how are we best serving our taxpayers. Not to say there aren't good services being delivered by townships; we're just looking at those opportunities where services may be able to be delivered more efficiently.

"We also appreciate when (legislation) focuses on a local view," she said.