1. Association of Indiana Counties Regional Public Forum on Declining Revenues: Challenges for Local Government Terre Haute, Indiana May 12, 2010

2. 2 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Property Tax Basics Property Tax Levy: Amount of money to be raised for a fund of a taxing unit Net Assessed Value (NAV): Value associated with real and personal property which is taxable Gross assessed value less exemptions and deductions Tax Rates: Rate charged to each applicable taxpayer in order to collect the approved levy Expressed in dollars and cents per $100 dollars of NAV Levy/NAV = Tax Rate Example: Vigo County Parks & Recreation Fund $1,194,048/($3,607,394,856/100) = $0.0331 Levy NAV Tax Rate

3. 3 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Tax Rate Impact to Homeowner

4. 4 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Legislative History Increase to sales tax to fund Property Tax Replacement Credits (PTRCs) reducing property taxes by 20% and creating the “property tax freeze” mechanism (1973) County Adjusted Gross Income Tax (CAGIT) PTRC mechanism and levy reduction mechanism to reduce property taxes in adopting counties Homestead Deduction and Homestead Credit to reduce property taxes for owner-occupied real property Creation of 2% circuit breaker for homestead eligible properties (2007) Elimination of personal property tax on business inventory Expansion of 2% circuit breaker to all residential properties and eventually to all property Change to 2% circuit breaker for homestead eligible property and 3% for non-homestead eligible property Change in valuation methodologies for agricultural land and large industrial properties Tax Rate Impact

5. 5 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Circuit Breaker HEA 1001 (2008) The Indiana General Assembly enacted legislation which provides taxpayers with a tax credit for all property taxes in an amount that exceeds a certain percentage of the gross assessed value. For taxes due in 2010 and future years, the Circuit Breaker Tax Credit is as follows: One percent (1%) for homestead property Two percent (2%) for residential property, long term care property and agricultural land Three percent (3%) for nonresidential real property and personal property

6. 6 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Circuit Breaker Effect on Taxpayers Homestead Property – Owner-Occupied Residential

7. 7 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Circuit Breaker Effect on Taxpayers (Continued) Non Homestead Property – 2% Circuit Breaker (Example: Apartment) Assessed Value = $1,000,000 Tax Bill = $36,216 Circuit Breaker Cap = $20,000 Circuit Breaker Tax Credit = $16,216 Nonresidential Property – 3% Circuit Breaker (Example: Commercial) Assessed Value = $1,000,000 Tax Bill = $36,216 Circuit Breaker Cap = $30,000 Circuit Breaker Tax Credit = $6,216

8. 8 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Circuit Breaker Effect on Taxing Units The Circuit Breaker Tax Credit results in a reduction of property tax collections for each taxing unit in which the Circuit Breaker Tax Credit is applied. A taxing unit may not increase its property tax levy or borrow money to make up for any property tax revenue shortfall due to the Circuit Breaker tax Credit. Per the County Auditor’s Office, the 2009 Pay 2010 Circuit Breaker Losses for certain taxing units in Vigo County are anticipated to be as follows: Vigo County: $3,023,721 (12%) Terre Haute: $6,433,572 (23%) Harrison Township: $140,713 (23%) Vigo County School Corporation: $3,225,507 (12%) Vigo County Public Library: $595,471 (12%)

9. 9 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP State Budget Analysis Revenue Source Actual Revenue YTD thru April Forecast Revenue YTD thru April Actual Revenue Prior YTD thru April Difference Current Year Actual to Prior Year Actual Sales & Use Tax $4,918.9$4,906.7$5,185.3-5.1% Individual Income Tax 3,158.4 3,078.2 3,550.3-11.0% Corporate Taxes 422.1 419.7 618.0-31.7% Total General Fund Revenue 9,753.6 9,698.510,635.1-8.3%

10. 10 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Personal Income and Its Impact on Revenues Nonfarm personal income - I ncome that is received by all persons from all sources, including salaries and wages, supplements, adjusted proprietors' income, adjusted rental income, dividends, interest, and transfer receipts minus farm income, which is comprised of the net income of sole proprietors, partners and hired laborers arising directly from the current production of agricultural commodities, either livestock or crops In Indiana, nonfarm personal income makes up over 99% of personal income Offsets to losses in wages and proprietor’s income mostly due to current transfer receipts, e.g., social security payments Transfer receipts are largely non-taxable or low tax for the purposes of income taxes

11. 11 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Property Tax Levy Limitations Taxing units limited in increasing their property tax levy by the Assessed Value Growth Quotient (AVGQ) Six-year average of changes in nonfarm personal income Percent Change in Nonfarm Personal Income From Previous Quarter Annual Percent Change in Nonfarm Personal Income 2008: Q1 2008: Q2 2008: Q3 2008: Q4 2009: Q1 2009: Q2 2009: Q3 2009: Q4 1.2%1.1%-0.2%0.0%-2.2%0.7%-0.4%0.8% 200420052006200720082009 3.7%3.1%5.9%3.2%2.8%-1.5%

12. 12 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Assessed Value Growth Quotient FY 2010: 3.8% Current Forecast of Indiana Personal Income Growth for 2010 = 1.07% Results in the following estimated AVGQ: FY 2011: 2.9% FY 2012: 2.4%

13. 13 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Vigo County Budget and Revenue History

14. 14 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Terre Haute Budget and Revenue History

15. 15 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Sullivan County Budget and Revenue History

16. 16 Crowe Horwath LLP is a member of Crowe Horwath International, a Swiss association. Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath International or any other Crowe Horwath International member. Accountancy services in Kansas and North Carolina are rendered by Crowe Chizek LLP, which is not a member of Crowe Horwath International. © 2010 Crowe Horwath LLP Options Available to Taxing Units Available options: Adjust budget – may result in reduced services Find efficiencies Adoption of Local Option Income Tax (LOIT) Increase other revenue sources – fees LOIT Options: Property Tax Relief – Reduces taxes payable by taxpayer to reduce number of taxpayers hitting their Circuit Breaker cap Levy Growth Replacement – Replaces annual increases to levies Public Safety – Revenues must be used for public safety activities. At least one of the other LOIT options must also be implemented. Amount of taxpayer relief from the LOIT options will depend on the income of the taxpayer and the value of the home