Aging IT system contributes to property-assessment woes

Livid about their property tax bills, droves of Marion County homeowners are questioning why nobody anticipated such steep
hikes.

The answer is simple: Indiana deliberately chose not to invest the tens of millions necessary for technology that could provide
a better forecast.

Instead, the state relied on an aging patchwork of property tax software. Using it, officials can only guess whether assessed
valuations of homes and businesses are correct. And accurately predicting the result of tax policy decisions is next to impossible.

"It's kind of appalling we find ourselves in the 21st century, and we don't have basic information," said
Indiana Association of Realtors CEO Karl Berron. "You can't make decisions when you don't have basic information,
and that's where we find ourselves now. It's really distressing."

"Unless we fix this, we almost can't fix anything else in the system, literally," he added.

Homeowners' property taxes increased dramatically this year for several reasons, including the elimination of the business
inventory tax and efforts to reassess property to market values. Many Marion County homeowners were stunned by the resulting
increases, estimated at 34 percent countywide. Some homeowners have seen far steeper hikes, with bills more than doubling
from last year.

Marion County Assessor Greg Bowes already has received more than 3,000 applications for appeal. Last year, his office saw
just 800.

"It's going to be a busy year," he said.

Better technology could have reduced assessment errors stemming from the market-value-adjustment process, known colloquially
as "trending." It also would have provided policymakers clear insight about how their decisions to change various
property tax levies would affect individual bills.

Indiana has considered modernizing its property-tax technology for decades. It most recently debated the idea in 2004, following
widespread struggles with the state's first attempt at reassessment tied to market values. On orders from the General
Assembly, the Indiana Department of Local Government Finance evaluated the computer systems responsible for assessment and
tax bills in all 92 counties.

The resulting "Indiana Uniform Property Tax Management System Feasibility Study" described a statewide technology
landscape based on antiquated standards and so poorly integrated that many local government offices couldn't share data
with one another, let alone the Department of Local Government Finance or the General Assembly.

Garbage in, garbage out, as programmers say. And not much has changed.

"Without standardized data in a consistent format, it is virtually impossible to compare property tax data between various
taxing districts," the report read.

"Without accurate, consistent and linked data from the [computer-assisted appraisal system] personal property returns
and tax and billing systems, it is virtually impossible to conduct research and analysis indicating shifts in tax liability
burdens that may result from a change in property tax public policy or law."

Statewide solution

The report laid out a variety of scenarios. The status quo, it accurately predicted, would result in "continued delays,
lack of data for policymaking, and continued errors that will affect taxpayers' tax rates and bills."

The most comprehensive solution–installing the same new computer system in every county–had $57.5 million in upfront capital
costs, plus another $18 million annually for maintenance and support.

State legislators balked at the high price tag.

"I'm not saying our recommendations are the only recommendations," said Beth Henkel, commissioner of the Department
of Local Government Finance from 2003 to 2005. "But until we have a statewide integrated system, we're not going
to be able to figure out what's going to happen to people."

Rather than buying and maintaining uniform property tax software for the entire state, the Department of Local Government
Finance is allowing every county to choose its own system–but it also is requiring that upgraded technology meeting new state
standards be in place by the end of next year.

A 35-member commission of local government officials and representatives of the Indiana Chamber of Commerce and other business
groups approved this approach, which leaves counties with the tab for the new systems.

County systems must meet strict state standards for quality and the ability to interface with other systems.

"There's going to be more competition [among vendors for contracts], and the costs may reflect that," DLGF
Policy Advisor Kurt Barrow said. "We're very optimistic. We're hoping to get the first vendor [certified] by
fall."

But the company responsible for property tax assessment and billing software in 73 counties–by far the largest provider
in the state–isn't so sure about that deadline.

"I'd be lying if I didn't tell you it's an aggressive timetable. But we're going to do our best to help
our clients in any way we can," said Paul Sylvester, CEO of Portage, Mich.-based Manatron Inc. "This is not a small
change by any means. And December of 2008 will be here before you know it."

Indiana has established–and failed to enforce–property tax software requirements before, noted Steve Johnson, CEO of the
Indiana Fiscal Policy Institute.

"The state has set some standards. The real question will be ultimately whether they can enforce those standards at
the local level," he said. "They have the means to do so. The question is whether they will ever have the will."

Ancient technology

Former state Sen. Larry Borst, now senior public policy consultant for Baker and Daniels LLP, recalls the $400,000 he appropriated
in the late 1970s–"when $400,000 was a lot of money"–to create Indiana's first version of a statewide property
tax software system. Several counties ran pilot versions they maintain to this day.

Around the same time, the computer revolution was gaining steam. Vendors were approaching counties, Borst recalled, each
offering different products. Some systems also calculated government payrolls. Others coordinated emergency communications.
Counties ended up buying unintegrated systems for property assessment, tax billing and just about everything else.

"The good-old-boy system prevailed," Borst recalled. "Consequently, you have a mishmash of systems out there."

The state didn't begin trying to set uniform software standards across counties until 1997. For the 2003 market reassessment,
it required every software provider to achieve them. But when no vendor could, the state allowed counties to offer temporary
certifications so the tax-billing process could proceed.

Before leaving the General Assembly in 2004, Borst helped order the DLGF's technology study. He's frustrated about
the lack of improvement. Bugs and data errors led to $200 million in extra costs for local governments after the 2003 reassessment,
he said–more than three times the price of a brand new statewide system.

Antiquated technology has other costs, too. Henkel recalled a huge error in Porter County a few years ago, when a $400,000
house was accidentally valued at $400 million. Because the IT systems there couldn't communicate or analyze data, no one
caught the error until after schools and local agencies had established their tax levies. The improper valuation's result:
budget shortfalls in the millions of dollars.

Lake County suffered similar problems when its software failed to notice the fact that some homeowners had been granted multiple
homestead credits.

"These are the kinds of problems we're seeing," she said. "It's just a mess."

Marion County maintains a mainframe property tax system developed internally in 1979. Think green screens. Center Township
Assessor Eugene Akers backs it up with paper stored in filing cabinets. His office is responsible for establishing the market
value of 3 million parcels of property.

It's a Herculean task. Akers, who took office this year, keeps $100 worth of candy on his office's front counter.
He said it sweetens the moods of the angry homeowners who have been visiting his office by the hundreds.

"Right now, the old system is just that–it's old," he said. "A better system of computerization would
help eliminate a lot of problems. [Assessed values] are just not distributed equally. I've been saying that from the second
week I was here."

Government officials at all levels share his frustration. The lack of precise data on assessed valuation leaves them uncertain
how much their arms of government will raise in property taxes each year. It also hinders their ability to project the impact
a bond issue would have on homeowners' property tax bills.

"We operate with guesstimates," said Louis Mahern, president of the Indianapolis-Marion County Public Library's
board of trustees. "That's no way to run a railroad."

Local switchover

After nearly 30 years, Marion County is on track to finally eliminate its mainframe property tax software system. Thorntown-based
Government Utilities Technology Service Inc. has secured the contract to replace it with a new, fully integrated system based
on Microsoft technology. It will cost $3.8 million to install and another $286,000 annually to maintain.

Once the software is in place, Marion County's assessors, its auditor and its treasurer will be able to share information
with one another and the state. GUTS CEO Eric Goodnight said his company spent $4.5 million to create it, and already has
secured Brown, Elkhart, Boone, Jasper, White, Blackford and Wayne counties as additional customers.

Indianapolis officials expect their switchover to take 24 months.

"It's going to be a bit challenging in terms of the data-conversion effort, because of the way the data has been
manipulated and stored in the past," Goodnight said. "There's just a lot to it."

Goodnight expects to meet the DLGF's December 2008 deadline. But it won't be easy.

To be in full compliance, counties must be able to fully integrate their systems with those provided by other state-certified
vendors. Manatron's Sylvester, the dominant competitor, said that could be difficult.

Both Manatron and GUTS are attempting to increase their share of the market. And they're not alone.

"Certainly when you have multiple vendors involved, it always increases the challenge," he said. "This is
a significant effort. It's not something a few developers can do over a few weekends."