ELKHART — A property tax relief plan in the works in Indianapolis would provide relief for homeowners.

But the proposed tax caps could mean financial headaches for cities and schools.

The New York Central Railroad Museum in Elkhart depends on city funding to stay in operation. It generates some revenue, but the bulk of it comes from city coffers.

“We do have a budget here,” said Ron Troyer with the museum. “As far as the funding, yes, we have to really be accountable for every penny."

Its operation, as well as that of the Elkhart Municipal Band and the Elkhart Environmental Center, for example, could be impacted by a cap on property tax revenues. The cap would reduce overall state funding for city departments and those programs.

The city stands to lose $3.8 million in state funding.

"And $3.8 million is a very large part of our budget,” explained Arvis Dawson with the mayor’s office. “It’s equivalent to probably ten policemen, ten firefighters. A department as large as the Streets and Sanitation Department could possibly be affected greatly.”

The city says it is not a given that the proposed state measure will have an adverse effect on the city budget. But it wants to be prepared in the likelihood that it might.

“We're looking at everything, we're cutting back on our big ticket items,” Dawson said. “We're preparing as if we're going to have a $3.8 million deficit.”

The Elkhart school system could lose $1.7 million in state funding that would be hard to absorb and could mean possible changes.

“Which could include a reduction in the number of teaching positions, which would necessarily result in increased student class size,” explained Doug Hasler, with Elkhart Community Schools.

In Goshen, the proposed cap in property taxes could mean a $1 million reduction in state funding.