A new state law could leave the City of Elkhart facing a $40 million annual budget shortfall, Mayor Rod Roberson said during an emergency press conference Tuesday.
“Senate Enrolled Act 1 is the biggest disruption to local government revenue in the past 50 years,” Roberson said.
The law, formerly known as Senate Bill 1, reduces property taxes and restructures how local income taxes are collected and distributed. City officials say Elkhart could lose $6 million in property tax revenue and another $34 million in local income tax annually starting in 2028.
“This isn’t anything that we delivered from cities and towns,” Roberson said. “This is something that this administration has delivered to us that we need to work together to be able to figure out the right way through.”
Despite the grim forecast, Roberson said the city is in strong financial shape today, thanks to a years-long savings strategy. Elkhart still plans to move forward with top-priority projects, including a new fire station and the Hively Avenue overpass.
However, Roberson warned that lower-priority projects could be delayed or canceled, and essential services such as public safety, parks, and road maintenance could be impacted if the legislature doesn’t act.
“We want to continue to make Elkhart a progressive community moving forward,” he said. “But this does not help. It actually makes it more challenging.”
SEA 1 encourages, and in some cases requires, cities to raise new revenue locally. Another law passed this session, House Enrolled Act 1461, says Elkhart must implement a local wheel tax to continue receiving state road funding, even if Elkhart County already has one. SEA 1 also allows cities to begin collecting their own local income taxes in 2028, separate from the county’s.
But Roberson said it’s unclear how those taxes would be implemented or calculated, since cities like Elkhart have never handled income tax collection directly.
He’s calling on residents to reach out to their state representatives and urge them to re-evaluate the law before its financial effects become permanent.
“We are faced with some obstacles and some challenges,” Roberson said. “And we need to alert our residents that these challenges are at our doorstep and we are working through them.”
The Elkhart City Council Finance Committee will meet Wednesday at 5 p.m. to discuss the financial impacts of SEA 1. Budget consultants will attend the meeting to help city leaders evaluate their options.
