The Shreve Freeze

Indianapolis Mayoral Candidate Jefferson Shreve announced Tuesday his plan to prevent rising property tax assessments from pricing Indianapolis residents out of their homes.

The Shreve plan will be open to every homeowner age 65 or older, and also to younger homeowners facing rising property taxes due to extraordinary increases in assessed values.  The plan would create a “Freeze Fund” using the city’s bonding authority. Once homeowners opt in, their property tax amount would be frozen. In each succeeding year, the amount of tax above the frozen level would be paid by the Fund. The amount of taxes paid by the Fund is tracked over time and when the home is eventually sold, the cumulative amount of the avoided taxes is repaid to the Fund out of proceeds from the sale.

“Perhaps because of my real estate experience,” said Shreve, “I could see that the problem just needed to be untangled. Every homeowner wants the value of their home to rise; that’s a good thing. We just need a simple financing mechanism to capture some of that value to pay increased taxes.”

“This will be a giant win-win for the city,” Shreve continued. “Seniors can forget worrying about future property taxes; they won’t be chased out of the neighborhoods they love. We need those seniors in our neighborhoods where they provide diversity, wisdom and connection to our city’s history. From the city’s growth and economic development perspective, rising property values is a good thing. The economics of progress means rising incomes and rising property values. Those things happen when a city is in demand. We want Indianapolis to be in demand.”

In addition to seniors, the program would be available to anyone whose assessed value rises by a certain amount in any one year. Shreve said initial modeling indicates that should be in the vicinity of a 15% increase.

A recently passed state law is currently being piloted in the Riverside Neighborhood to address rising taxes due to rapidly escalating assessed property values. However, it involves the City-County Council approving tax credits to help long-standing home owners. Shreve called this program a half-measure. “It’s well intentioned, but it’s complicated and doesn’t cover all the tax increase. And the larger problem with issuing credits,” said Shreve, “is that it robs Peter to pay Paul. The burden of paying those rising property tax bills is just shifted to everyone else.”

Shreve said his plan is simple and self reliant. Homeowners freeze their property taxes for as long as they own the property. The increase in property taxes and the cost of carrying the debt are financed by bonds. The property taxes still get paid each year through the bonds, so the city, schools and other units of local government are not out any money. When the home is eventually sold by the owners or their estate, the city collects the value of all the avoided property tax from the proceeds of the sale to retire the debt.

The only condition will be a threshold equity value in the home, which isn’t likely to be a problem for seniors who’ve been in their homes a long time, or even for younger homeowners whose mortgages predate the escalating property values.

“This property tax freeze is an example of the imagination and innovation that I aim to bring to Indianapolis city government,” Shreve said. “Public safety has dominated my campaign because we can’t be a successful city until the violent crime problem is solved. We must be safe, and we must feel safe. But there is a lot more to being mayor than solving the crime problem, and we must advance across a very wide range of policy issues.”

For an example of how this would work, click here.