When the Gary Common Council reconvenes for its budget hearing on Oct. 28, members will confront two of the city’s biggest financial challenges heading into 2026: funding the federally mandated overhaul of its wastewater system and managing the looming fallout from new state tax laws.
At the center of debate is an ordinance proposing steep wastewater rate increases for commercial and industrial customers of the Gary Sanitary District. The hikes are intended to support the district’s Long-Term Control Plan — a $300 million, 30-year project required under a federal consent decree to reduce sewage overflows into the Grand Calumet River.
To meet a $15 million annual revenue target set by the U.S. Department of Justice and Environmental Protection Agency, the sanitary district is seeking to raise nonresidential rates to $14.38 per thousand gallons from $8.50, while keeping residential rates flat. Officials said the increase, while not enough to fully meet the federal mandate, demonstrates the city’s fiscal responsibility and commitment to compliance.
“By raising our industrial and commercial rates, we can hold residential rates steady,” GSD Executive Director Ragen Hatcher told the council’s Finance Committee earlier this month. “This is about making sure we meet our federal obligations without overburdening residents.”
However, council members voiced concern that the sharp increase could drive away the very companies that make up the district’s financial base. Commercial and industrial customers currently account for 30% to 40% of the district’s roughly $33 million in annual revenue. Council President Lori Latham cautioned that while rate adjustments are necessary, the city must be careful not to alienate major employers like U.S. Steel.
“A lot of these large commercial and industrial clients could, maybe not immediately, but eventually divest and invest in their own systems,” Latham said. “While raising the rates, we also have to maintain the relationships so they don’t begin to leave one by one.”
In 2016, the federal government and the state of Indiana took the city of Gary and the sanitary district to court, accusing them of polluting local waterways and violating environmental laws. The main issue was that untreated sewage and stormwater were overflowing into rivers in violation of the Clean Water Act and the city’s wastewater permit.
Beyond wastewater, council members are also preparing to tackle the ripple effects of Senate Bill 1, which is expected to shrink the city’s property tax collections and shift the balance of its tax base. The bill changes the local property tax and revenue systems, giving homeowners a 10% tax credit while also raising the business tax exemption to $1 million in 2026 and $2 million in 2027. Financial consultants are still mapping out the long-term impact, but officials say early projections show that business and industry will shoulder a greater share of the city’s tax burden, potentially undercutting residential redevelopment efforts and tax-increment financing districts.
To fill the anticipated shortfall, city leaders are considering a 1.2% local income tax increase under the County Option Income Tax framework. The move would offset declining property tax revenues while freeing up general fund dollars for the Gary Police Department. Meanwhile, fire and EMS funding could be shifted under county-level COIT allocations, though officials are still awaiting clarity from the state on how flexible those funds can be used.
Despite the uncertainty, Finance Committee members said the Oct. 28 hearing will be pivotal in determining how Gary adapts to these overlapping fiscal pressures and how they balance federal compliance, local tax restructuring, and long-term economic stability as the city heads into the 2026 budget year.
The budget hearing will be held in the Gary Public Library.