The homestead credit was eliminated April 1, 2008, in an unadvertised meeting attended by city and county officials.

The decision sparked outrage, not only because it raised property taxes, but also because the public didn't learn of it until more than a year afterward.

In reinstating the credit for 2009 on Monday, Councilman John Friend said the bulk of the increase in local property taxes this year resulted from the decisions of state lawmakers, not local officials. His 2009 bill went up by $800 — $640 of which was caused by the state's decision to reduce tax credits dispersed throughout Indiana.

Charlene Braker of Evansville said such statements miss the point. Residents aren't as much upset over the elimination of the local credit as they are over the way it was eliminated.

"It was about not having a voice," she said.

Mike Wilson of Evansville asked how taxpayers would receive their local credit this year. Jenny Collins, the city controller, said the method of the repayment hasn't been decided, but that it likely will appear as a reduction to their fall tax bills.

Meanwhile, a question arose over whether more could be done to lower property taxes in 2010. On Friday, the state sent local officials a letter detailing a plan that would use money raised through a new local income tax to lower property taxes.

The formula, laid out by the Indiana Department of Local Government Finance, is a way of overcoming restrictions expected to reduce the benefit of the local homestead credit below what it was in 2008.

The first step of the plan would be to lower the county-option income tax from 1 percent to 0.95 percent.

This would be done by the governing bodies of Evansville, Darmstadt and Vanderburgh County, which together compose the county income tax council that has the responsibility over local homestead credits.

Although the statutory deadline for making such a change is Aug. 1 of the previous year, the state agency said it is "prepared to authorize an exception."

Next, local governments could recoup the lost 0.05 percent — almost $1.8 million, according to the state — by adopting a new 0.05 percent local-option income tax designated for property tax relief.

The state agency says those changes would offer about $5.06 million in tax relief while avoiding a net increase in income taxes. That amount is above the $3.3 million in credits local governments can now expect to receive in 2010, but is nearly equal to the $5.1 million they received in 2008.

"In 2009, the $1.8 million reduction in property tax relief (the reduction of the local homestead credit from $5.1 million in 2008 to $3.3 million) resulted in an increase of $1.8 million for local taxing units to spend," the Department of Local Government Finance wrote in its letter.

"If the county takes the actions described in this memo, the $1.8 million would be given back to taxpayers for property tax relief."

Mayor Jonathan Weinzapfel said he and other local officials are studying the proposal.

Source: http://www.courierpress.com/news/2009/aug/17/city-restores-09-tax-credit/