SOUTH BEND — The possibility of a local income tax increase is back on the table in St. Joseph County.

Bills were filed this week with the St. Joseph County Council and the South Bend Common Council proposing increasing local income taxes to address large budget shortfalls projected for city and county government operations.

The proposed legislation would:

— Increase the current county economic development income tax from its current 0.2 percent to 0.4 percent.

— Impose a public safety local option income tax of 0.25 percent.

— Impose a property tax relief local option income tax, reducing the county property tax rate by 0.5 percent.

The changes would be effective Oct. 1.

South Bend Council President Derek Dieter, D-1st District, who voted against an option tax increase last year, said he favors the measure this year.

"We’re going to lose $20 million in revenue. We’re very close to the point of shutting down the recreation centers and the zoo," Dieter said. "I’ve looked at all the revenue sources. If we cut further, I think it would be a detriment to the public."

Tax increases in St. Joseph County must be approved by two of the three municipal governments: South Bend, Mishawaka and St. Joseph County.

County Council President Rafael Morton, D-District D, filed the bills with that body. South Bend Mayor Stephen Luecke filed the bills with the South Bend Common Council.

Neither Luecke or Morton could be reached for comment Wednesday.

In part because of Indiana property tax relief, South Bend is facing a $20 million budget shortfall in 2010. The city is looking at reducing city police and fire staffing, and cutting some parks department services.

St. Joseph County is facing a budget shortfall of $6 million to $10 million.

Mishawaka city officials have estimated a budget shortfall of about $1.5 million for 2010.

The next meeting of the South Bend council is July 13. The County Council next meets on July 14.

"I think it has a great chance of passing," said South Bend Council Member Henry Davis Jr., D-2nd District. Davis said he would like the council to make as many cuts in the budget as possible, such as eliminating take-home cars for police, before voting on the income tax hike.

"We want to be sure we are doing all we can with the money we have," he said. "We have to exhaust all other options."

"I think this is kind of short notice," said South Bend Council member David Varner, R-5th District, who just learned of the measure today. He said he doesn’t think the council necessarily has to vote on it on July 13, but could vote later in the month.

Although Mishawaka would benefit from the tax proceeds if the legislation is passed, Mishawaka leaders don’t plan to be involved in the vote. Members of the Mishawaka Common Council have no plans to vote on the tax increase proposal.

"I haven’t heard any word on that from the mayor or the council," said Council President Ron Banicki, D-at large. "I have no intent to bring it up."

If both South Bend and St. Joseph County approve the tax, "I guess we’d have to take the money and use it wisely," Banicki said.

Mishawaka Mayor Jeff Rea said he has no plans to ask the council for a tax increase. "We’re trying to attack the budget (deficit) from 100 different angles," he said. "We still have some of those left."

Tribune staff writer Sue Lowe contributed to this report.

Staff writer Margaret Fosmoe:
mfosmoe@sbtinfo.com
(574) 235-6329