Gary Mayor Eddie Melton is trying to find ways to close a $9.8 million gap in the 2027 budget that he has proposed for the city.
But one of the approaches he is considering — tax increment financing — raises concerns for Kenneth Whisenton, the chair of the committee that reviews money matters before the full Common Council votes on them.
“I want to find a better way of managing debt as we go forward,” said Whisenton, chair of the Ways and Means Committee. Gary has used tax increment financing in the past, including last year, but a new state law will make it harder for the city to use it starting in 2029.
“My fear is if we take this same methodology into next year, by year three we’re going to be screwed,” Whisenton said.
The gap — and the mayor’s efforts to fill it — will be one of the subjects of discussion at Tuesday’s Common Council meeting. Residents may sign up to submit public comments during the meeting.
The mayor has proposed a $98 million budget for 2027, a slight increase over 2026. Melton’s core vision for Gary has remained consistent: building a safer, cleaner, more vibrant, and financially stable city.
“The 2027 proposed budget supports that vision by protecting essential services while making highly targeted investments in our neighborhoods, infrastructure, and economic growth,” Melton said in a statement to Capital B.
The gap is projected because Gary’s revenues will fall by $10 million next year, to $88.2 million. Some of the city’s casino revenue, typically used for everything from salaries to vehicle repairs, is being diverted to pay other obligations.
Last year aside, there had been a gap in every budget cycle in the past decade, but the current projected deficit would be the largest since a $17 million gap in 2017.
Chenika Beck, the city’s controller, is responsible for managing Gary’s finances and presenting plans to the council. Beck said that the administration is entertaining a number of options to bridge the gap, including the use of tax increment financing.
Tax increment financing is revenue that comes from a special tax district called a TIF.
In 2024, Gary had 15 TIFs, according to the state’s website for local government finance, Indiana Gateway. Some of the tax revenue from Gary’s TIFs is reinvested to encourage development, but some of the revenue goes to the Gary Redevelopment Commission. And if approved by the Common Council, the money can be diverted to close gaps in the city budget.
Starting in fiscal year 2029, tax increment financing will be a less effective way for Gary to cover its budget deficits, because Indiana Senate Bill 1 will have taken effect. The bill, which set out to lower homeowner property tax bills, is predicted to reduce the revenue that Gary earns from all property taxes, including TIFs, by $16 million starting that year. That steep drop is what Whisenton said worries him about Gary’s reliance on tax increment financing.
Last year, the council voted 8-0 to use more than $3 million in TIF funding for incentive pay for city workers.
The mayor said that tax increment financing would go toward three areas in 2027: infrastructure upgrades, building improvements, and public safety. The administration did not say specifically how much TIF money is budgeted for public safety in 2027.
Gary also has cash reserves and a rainy day fund, but the city does not yet intend to engage those yet, Beck said.
The 2027 funding gap is indicative of the challenge the city faces as it attempts to balance the cost of city services with its other obligations, which involve giving incentives to encourage development and returning subsidies that it received in error.
About 80% of the casino revenue that the city is losing next year is being diverted to cover the city’s scheduled $5 million contributions for construction of the Lake County Convention Center and its $3 million contribution to a new Metro Center.
The remaining 20% of the casino funds will be diverted to East Chicago and Michigan City. Due to a clerical error committed by the state, Gary received funds meant for those cities and must now compensate them.
Melton’s proposed budget for 2027 more than doubles 2026’s spending on local roads and increases by 30% the city’s information technology expenditures, making those line items the biggest increases. Spending on roads and streets is projected to be $475,000, with IT increasing to $650,000.
The mayor says residents can expect continued investments in the physical foundation of the city, such as the Relight the City Initiative, which saw $3.4 million dedicated to the purchase and installation of new street lights across the city.
The two biggest decreases — in fire department equipment and telephone equipment and postage — were negligible, at less than $300,000 each.
Wages and benefits account for approximately $60.2 million of the mayor’s proposed budget. The lionshare of wages and benefits will go to public safety employees. About half of the total proposed budget, between $48 million and $49 million, is slated to support police, fire, emergency medical services and pensions for the retirees of those departments.
At Tuesday’s meeting, the council is expected to hear from the Gary/Chicago Airport and the Gary Public Transportation Corporation, which will present their own budgets.
The city’s 2026 budget will also be on the agenda at Tuesday’s meeting. Gary faces a Dec. 31 deadline for spending the remaining roughly $5 million of the $80 million in federal American Rescue Plan Act money that it received. City officials plan to use the money for the Brothers’ Keeper program, the new animal shelter and relocating the city’s Health Department.
The council must vote to adopt the final budget by Nov. 1, then submit it to Indiana’s Department of Local Government Finance within five days of adoption. The department will then review the budget, approve it if it meets standards, and set Gary’s tax rate. Gary’s taxes are consistently the highest in the state.
