(WSBT) A new report shows Governor Mitch Daniels' plan for property tax relief could mean big trouble for local governments across St. Joseph County. But some say there is a way to help fix the problem.

Governor Daniels' plan would reduce most homeowners' property tax bills by 38%, but new projections from Indiana's Legislative Services Agency show it would also cut the revenue most counties get by 5%.

But St. Joseph County stands to lose closer to 13%, and some estimates put the loss as high as $58 million a year for county government, city and towns, schools and even libraries across the County. Some worry if the figures aren't changed, massive cuts could lie ahead.

Turn back the clock to six months ago, and you might have heard St. Joseph County leaders saying something like this:

"We won't be able to survive," said County Commissioner Steve Ross.

Their concern?

The potential impact of Indiana's new circuit breaker caps, set at 2% for homeowners, and 3% for businesses. But state lawmakers crunched the numbers, and offered short term relief in the form of a county local option income tax, and other general fund transfer options. Many thought the problem was solved.

But now, some are worried the Governor's plan to swap property taxes for a 1% increase in the state's sales tax could make the problem even worse.

"This will merely speed it up," said Ross, referencing the fact that the business portion of the circuit breaker caps weren't scheduled to take effect until 2010. The governor's plan would also cap businesses at 3%, but the change would take effect immediately after the plan was signed into law. Homeowners' property taxes would also be capped at 1% of their property's assessed value, instead of 2%.

"The county will end up 10 million dollars short," Ross continued. "It will create an absolute lack of ability for us to deliver services to the citizens of this county."

And that goes for all services from police and fire to parks and streets.
But some are convinced there may be another solution. A so-called "tourist tax" -- a quarter or half percent increase on services used by those from outside the county.

And you might be surprised by who's on board with the plan.

"[With the sales tax added in] obviously it adds up, and it would be noticeable," said Betsy Baker, manager of South Bend's The Vine Restaurant. "But I don't think it would anything we couldn't handle, especially if the money's going back into the community."

And the county's Hotel/Motel Association says they're confident their industry could absorb a small percentage hike as well.

So, what are the chances a service tax increase could be a part of the puzzle?

"I don't see that going in the Indiana State Senate," said Indiana Senator John Broden, (D) South Bend. "The Indiana Association of Cities and Towns which represents mayors and other local elected officials has been seeking that sort of tax mix for years, and has never gotten a foot off the ground."

Sen. Broden says, while that type of "service tax" can be implemented by the state legislature on a county by county basis, lawmakers often prefer a more "uniform" statewide tax, and most other counties don't have the high tourism revenue that St. Joseph County does, so it's unlikely a "tourist tax" would move forward at the statehouse.

That's left some repeating that same old phrase from the days of circuit breaker, and hoping someone is listening before it's too late.

Sen. Broden says he still believes there can be real property tax relief that won't bankrupt local governments, but he says the caps proposed in the governor's plan must be changed to help achieve that.

The Indiana House Ways and Means committee began debating the governor's plan Monday, and have scheduled another meeting for next week.