Delaware County, Indiana - Overview and Insights

Local government is often challenged with limited or declining revenue sources; however, the demand for services rarely decreases. Balancing declining revenues with continuing demand for services underscores the need for local units of government to extend their planning horizons beyond one year. Furthermore, maintaining adequate cash reserves is imperative for managing internal cash flow shortages and avoiding interest costs associated with external borrowing.

Cash Reserves

Best practices for the General Fund suggest maintaining no less than two months of revenues to expenses, equivalent to approximately 16% to 17% of available cash on hand. Several factors must be considered when determining the appropriate level of cash reserves. These include the size of the government, monthly recurring expenses such as payroll, timing of receipts, potential risks of revenue shortfalls, and legislative changes. Optimal cash reserves to cover monthly recurring costs are typically 25% or more. It is important to recognize that there is no universally applicable cash reserve percentage.

Moreover, cash reserves should not be used to cover recurring costs such as payroll, health insurance, or utilities since depleted reserves are generally not replenished unless the local government significantly underspends its budget. Cash reserves are most appropriately utilized for one-time expenditures, such as capital assets or projects. Effective management of cash reserves enables local governments to plan carefully and make minor budget adjustments rather than implementing sweeping changes.

Assumptions and Data Collection

Certain assumptions were made in preparing this analysis. The actual impacts may vary significantly from these assumptions. This analysis should be considered a living document and updated as additional data becomes available such as, but not limited to, actual property tax collections and delinquencies, local income tax certifications, changes in State distributed revenue, and actual collection of local charges for services.

To complete this report, we have gathered information from a variety of resources including the County's internal records, the County's Gateway Annual Reports for 2023, 2024 and 2025, and the County's 2026 Gateway Budget. Finally, we used our own internally generated expertise regarding property tax caps, local and state economic climates and our knowledge of available funding sources to shape our analysis and recommendations presented in this report.

2025 and 2026 Legislative Changes

Assessed Values

Recent legislation modifies homestead deductions, introduces additional credits, provides deductions for 2% properties, raises the agricultural land capitalization rate, increases the de minimis exemption threshold for business personal property, and exempts most new business personal property investment from the 30% depreciation “floor” (but not for utilities). These adjustments are expected to decrease the net assessed value or slow its growth, which may lead to higher property tax rates. Higher tax rates could result in future property tax credit increases and potentially reduce property tax revenue.

Maximum Levy Growth

Legislation capped the maximum levy growth quotient at 4% for 2026. For the years 2027 through 2029, the formula will be based upon non-farm income with a 6% cap. For 2030 and beyond, the formula will remain the same, but an extra public hearing will be required during the budget process if the unit increases the tax levy and rate. Legislation also eliminates the ability for growing communities to request a permanent increase to the maximum levy based on net assessed value growth.

Property Tax Revenue

Based on the DLGF Circuit Breaker Report dated May 12, 2026, property tax losses in 2026 incorporating legislative changes from SEA 1 - 2025 are $8,512,166. Preliminary estimates of the County's property tax revenue loss are $8,660,093 (2027), $9,354,942 (2028), $10,913,419 (2029) and $11,478,384 (2030) based on our estimates of Property Tax Credits. Losses for 2027 - 2030 are based on a percentage of levy from the Policy Analytics report dated June 18, 2026.

Road Funding

House Enrolled Act 1461 (2025) reduces the percentage that counties and municipalities are required to allocate to MVH Restricted from 50% to 40% under the condition that both of the following criteria are met:

The average pavement quality (PASER) ratings are a minimum of six (6) in the previous calendar year, and
No more than 15% of the highways are classified as being in failed condition.

(Continued on next page)