TERRE HAUTE —
For all fiscal prognostications, 2013 remained a tough guess at best on New Year’s Eve.
Negotiations between White House and Congress remained ongoing up until midnight as elected officials struggled to avoid across-the-board tax increases and program cuts associated with the year-end deadline.
Terre Haute Mayor Duke Bennett said the metaphorical “fiscal cliff,” whether avoided or endured, will directly impact everyone who lives in the city, although the impact to the city government itself will be less direct.
“It still remains to be seen what that full impact will be,” he said.
Meanwhile, forecasting the economy of 2013 remained impossible, with Associated Press reports updated continuously throughout the legislative process.
Unless an agreement was reached and approved by Congress by the start of New Year’s Day — which seemed quite unlikely as the clock ticked toward midnight — more than $500 billion in 2013 tax increases were set to take effect and $109 billion carved from defense and domestic programs. Though the tax hikes and budget cuts would be felt gradually, economists warn that if allowed to fully take hold, their combined impact — the so-called fiscal cliff — would rekindle a recession.
Bennett said recent news that Vigo County’s assessed value has plummeted nearly $300 million already had a cloud over the local economy.
“I don’t think it was going to be a great year anyway. Things are starting to level off but they’re still tough,” he said, emphasizing the importance of preventing a worsening of the economy.
But about 80 percent of the assessed value’s loss came in Harrison Township, meaning the City of Terre Haute could lose up to an additional $3 million in property tax revenue as a result. That loss would come on top of other cuts associated with property tax caps.
In 2012, the city received $6 million less than it did in 2008, he said, explaining that represents a cut of about 25 percent to the general budget.
“And we know we’re going to lose about the same this year, and now maybe another couple million more,” he said, adding no final numbers have been made available because county officials were notified just in early December.
Dan Doan, Central Region CEO of Old National Bank, said that, like everyone else, business leaders were “waiting hourly” for news about the legislative talks. Budgets have been set, and many businesses have substantial cash on the balance sheets to invest, but without a clear picture of tax rates and government budgets, few want to move quickly, he said. Year-end activity was marked by wealth transfer moves as clients prepared for potential changes in capital gains tax policy.
In the big picture, interest rates are expected to remain low for the next couple of years, and Old National Bank will continue to work with clients to maximize their investments, he said.
“We purposely work with clients as they have maturing CDs (certificates of deposit) and a lot of cash in savings so they can be aware of the various opportunities,” he said.
The demand for and subsequent value of farm land has gone up considerably in recent years, nearing historical levels in some cases, he pointed out. These values have come at a time when the price of agricultural products also has risen, although input costs also have gone up.
Commodities as a whole, particularly gold, have been strong, but their future too is unknown, he said.
“Who’s to bench-mark it?” he posed, pointing out that no one knows for certain if gold prices are at their peak or if they’ll continue to climb. Policy changes at play in Monday’s legislative talks could be a factor. “There’s a lot of speculation around that.”
Going forward, Doan said the bank will be cautious as it works on behalf of clients.
“Diversification we believe in whole-heartedly,” he said.
Brian Boyce can be reached at 812-231-4253 or email@example.com. The Associated Press contributed to this report.