FORT WAYNE, Ind. (WOWO) — City leaders across Indiana are sounding the alarm over financial shortfalls brought on by Senate Bill 1, a new law that changes the way property taxes are collected statewide. While the bill aims to provide short-term relief to homeowners, local officials say it’s shifting the burden to cities — and the effects are already being felt.

Under the new law, property taxes are being cut now, with the expectation that municipalities will recoup the lost revenue later through local income taxes. But in practice, that shift is squeezing local budgets hard, especially in smaller communities.

In Fort Wayne, officials planned ahead, setting aside nearly $8.8 million in reserves to offset the tax revenue loss. But not all cities have that financial cushion.

“It won’t cripple us,” said Huntington Mayor Richard Strick, “but it’s not going to help residents in the long run either.”

Strick says while some homeowners may notice a dip in their property tax bills, it’s likely to be temporary. Cities facing widening budget gaps will have little choice but to raise local income taxes — effectively canceling out any savings taxpayers saw on the front end.

A Growing Concern for Local Governments

The real-time impact of Senate Bill 1 is now starting to show in municipal budgets, with officials scrambling to rework spending plans. Public safety, infrastructure projects, and community services could all see cutbacks if the revenue shortfall isn’t addressed.

Mayor Strick and other local leaders worry the law prioritizes short-term political wins over long-term stability.

“It creates the illusion of savings,” said Strick. “But at some point, cities still have to pay the bills — and that money will come from somewhere.”

As the 2026 budget cycle approaches, city councils across the state are weighing their options — from raising local taxes to postponing capital projects and reducing city services.

What’s Next?

State lawmakers who backed the bill argue that it gives taxpayers relief during a time of economic strain and inflation. But with more cities facing budget shortfalls and limited flexibility to raise funds, the political debate over property tax reform may be far from over.

For now, residents are left to weigh the short-term benefits against potential long-term costs — and city governments are left to do more with less.