The City of Gary will have to pay approximately $12.3 million to East Chicago and Michigan City after the Indiana State Comptroller made an accounting mistake.
The Indiana State Comptroller mistakenly sent the funds to Gary that should’ve been distributed to East Chicago and Michigan City to ease the financial burden following the move of the Majestic Star casinos to Hard Rock Casino Northern Indiana, located along Interstate 80/94.
Ahead of the move, the legislature voted to provide the communities with deficiency payments from 2022 to 2025, but the state comptroller never released the payments, said State Rep. Gregory Porter, D-Indianapolis, in a news release.
Gary should be able to repay the money over several years, Porter said, and the impacted communities should receive a one-time payment from the state including interest.
“Why shortchange our cities when the state didn’t do its job?” Porter said in the release.
Gary Mayor Eddie Melton said in a statement that he was recently informed about House Bill 1448, and he was shocked the language was inserted into a bill from 2019 and would have a dramatic impact on the city.
Melton called the legislation a setback and said it undermines the work of his administration’s first year.
“It is totally unrealistic that, according to this language, the city should have to pay anything in 2025,” Melton said. “I worked closely with my administration and the Gary Common Council to pass a 2025 budget crafted to address the needs of Gary citizens. For this bill to be brought up at the last minute to address this egregious oversight is unjust.”
He also believes Gary should not be held accountable for casino gaming decisions made by entities in Indiana and Illinois. Melton plans to work with stakeholders to work toward “a realistic solution” that won’t impact the city’s fiscal standing.
Rep. Hal Slager, R-Schererville, authored House Bill 1448 to address the issue with supplemental payments that were added into Indiana law during the 2019 session.
In 2019, Hammond was part of the original bill but wasn’t included in House Bill 1448. Mayor Tom McDermott said he didn’t know anything about this year’s bill, but since Hard Rock Casino opened, Horseshoe in Hammond has lost about $15-20 million each year. The city’s yearly revenue is about $130 million, he added.
East Chicago and Michigan City were also affected by Hard Rock’s opening, McDermott said.
“We’ve had to adjust on the fly, but life would be a lot easier if we had the revenue that we had originally,” McDermott said. “No doubt about it, there was a transfer of wealth from those cities to Gary.”
House Bill 1448 extends the time for these payments by an additional three fiscal years, so that payments can be made from Gary’s wagering tax revenue to East Chicago and Michigan City.
Under the bill, for the fiscal year beginning July 1, 2025, approximately $1.4 million should be paid to Michigan City for the funds not paid in fiscal year 2021.
Starting in fiscal year 2026, approximately $2.9 million should be paid to East Chicago and approximately $2.2 million should be paid to Michigan City for funds not paid in fiscal year 2022, according to the bill.
For fiscal year 2027, approximately $3.6 million should be paid to East Chicago and approximately $2.2 million to Michigan CIty for funds not paid in fiscal year 2023, according to the bill.
Slager couldn’t be reached for comment.
“Having served in local government, I understand Gary’s situation, and I am committed to working with the legislature to find a fair solution that balances the interest of all stakeholders,” said State Comptroller Elise Nieshalla in a statement to the Post-Tribune.
State Sen. Mark Spencer, D-Gary, said in a statement that he has been in contact with Melton, Gary City Controller Celita Green and officials from the Indiana State Comptroller’s office, who are all “committed to coming to a quick solution that is fair to all communities involved.”
“The failure to disburse payments is in no way shape or form, the fault of the City of Gary, or any of the other affected communities,” Spencer said. “While the communities of East Chicago and Michigan City should speedily receive the dollars they are owed; this should not come at the expense of the financial stability of the City of Gary.”
State. Sen. Lonnie Randolph, D-East Chicago, said it’s unfair that the state made a mistake but that Gary has to repay it. Under a new administration, Gary officials have been working hard to find new revenue streams to improve the city, Randolph said, and slashing the city budget would have a negative impact.
“I’ve got a problem with that,” Randolph said. “The state seems to be singling out Gary.”
The legislature, which is in session and working on a state budget for the next two years, should consider a penalty for the comptroller to prevent the office from making a similar mistake in the future, Randolph said.
“There should be some penalty for the comptroller for making such an erroneous mistake,” Randolph said. “Don’t look to the City of Gary to fix the mistake.”
In 2011 and 2012, the two accounting errors were made as state corporate income tax and local income taxes were collected but then lost, Porter said. The mistakes led to a $500 million budget shortfall, Porter said, and state officials hired a private accounting firm to find the funding.
“I don’t know why there was a lapse in practice despite spending thousands for a firm to prevent additional errors. I’m sure this mess will be cleaned up, and communities will receive their entitled funds,” Porter said.
East Chicago Mayor Anthony Copeland hadn’t heard of the payment error but said it’s “a lot of money” for Gary to lose.
Michigan City Mayor Angie Nelson Deuitch said that although the error wasn’t Gary’s fault, she’s excited for her community to receive the money.
“In Michigan City, we’re just excited to see how they handle it, and we hope for a successful outcome,” Deuitch said.
Because it’s her first year in office, Deuitch said she didn’t suspect the error. She learned about it in December. She hasn’t talked with city of Gary officials about the error because it’s a state issue.
“(State legislators) are addressing it,” Deuitch said. “I do believe they’re trying to make sure that the cities receive their full payment and also that there isn’t a tremendous burden on Gary.”
