KOKOMO — Taxing units in Howard County will not receive $6.1 million in personal property taxes owed by the former Chrysler LLC for the spring and will be down $12.3 million for the year unless an agreement is reached.

Howard County officials received the news Friday that most of the taxes owed by the now-defunct company won’t be paid, setting off a wave of local contingency planning meetings.

Chrysler Group LLC, the new company formed with Fiat, has agreed to pay $2.2 million in real estate taxes owed by Chrysler LLC, the now-defunct firm formerly owned by the Cerberus private equity firm, according to Larry Murrell, county attorney.

Murrell said Chrysler Group LLC has indicated it may also pay the fall real estate taxes owed by Chrysler LLC early, pending the outcome of an appeal it has filed on the assessed value of Indiana Transmission Plants 1 and 2.

“The personal property taxes are not going to be paid,” Murrell said. “We are still in negotiations about personal property. The real estate taxes have been resolved; the personal property tax discussions are ongoing.”

The four taxing units expected to be impacted the most by the non-payment of the personal property taxes are Howard County, city of Kokomo, Northwestern School Corp. and Kokomo-Center Consolidated Schools.

All four of those units may be forced to apply for loans from the state’s Rainy Day Fund.

Earlier this week, the Indiana House passed an amendment to free up Rainy Day money in case the bankrupt Chrysler LLC defaulted on tax payments.

State Sen. Brandt Hershman, R-Monticello, said early Friday that he expected the Senate budget bill, which could pass the Senate Tuesday, would contain a similar provision.

“It will happen,” Hershman said of the emergency loan money. “I talked 1/8with Howard County officials 3/8 and I told them ’I can’t expect you to do anything about a problem of that magnitude.”

Hershman said he expected the loan provision will be approved in the final budget bill.

“We’ve got lots of other things to fight over 1/8at the Statehouse 3/8,” he said. “That’s not going to be one of them.”

The only alternative to Rainy Day Fund loans would be a $65 million escrow fund, administered by the U.S. Bankruptcy Court in New York overseeing the Chrysler LLC bankruptcy.

Murrell said the county will file a claim with the court, seeking payment from the escrow fund.

Originally the Chrysler Group LLC was not going to pay any of taxes owed by the former company, Murrell said.

“In the short period of two weeks, excellent progress was made resulting in the payment of the real estate taxes,” Murrell said. “We are very pleased with the access and communication with the attorney for the Chrysler Group.”

Murrell said Chrysler Group LLC will pay all the property taxes owed to Howard County in 2010.

He said Howard County is the first taxing entity in the U.S. to reach an agreement regarding the payment of taxes.

Hershman, however, was critical Friday of the Chrysler Group LLC’s decision not to pay the entire property tax bill.

“I think it’s reprehensible. This is not only a firm refusing to pay taxes that will provide it with police and fire protection, but it’s also putting the burden on the back of a community already struggling,” Hershman said.

He said the fact Fiat acquired Chrysler through a federal bailout program made the non-payment worse.

“It adds insult to injury, because it’s a firm which has succeeded because of people who do pay their taxes,” he said.

Howard County Council President Dick Miller said Friday he thought the county would have no choice but to ask for a state loan.

“At this moment, as far as the county operations are concerned, I see almost no way but applying for that loan,” Miller said. “Then we have to face the reality that it is a loan. So then we’ve got to determine how to pay it back.”

This is the second time Howard County taxing units are seeking loans from the state’s Rainy Day Fund.

When the Delphi Corp. filed for bankruptcy protection in 2005 the legislature approved as much as $3.2 million in loans to local taxing entities.

Those loans have to be repaid in 10 years or whenever the outstanding tax bill is paid.

Miller said Friday’s news was especially difficult, in light of the assistance the city and county gave to the former Chrysler in the past.

When the former Chrysler Corp. wanted to build the Indiana Transmission Plant at U.S. 31 and Smith Road, the city and county contributed $10 million in infrastructure improvements, along with tax abatements.

The new company is now trying to obtain tax breaks on the two ITP properties by filing an appeal with the Howard County Assessor, asking for a reduction in the assessed value of those plants.

The current assessed value on the two plants is $106.5 million, and Chrysler wants to lower the amount to $55 million. The plants have never been assessed at $55 million, county assessor Jamie Shepherd said.

“Phase 2 of the appeal is being completed,” she said. “We’re waiting on additional information from Chrysler. Any adjustment will be made to the fall payment.”