On Election Night, Gov. Mitch Daniels was in Chicago when the stunning news reached him: Indianapolis Mayor Bart Peterson had lost to Greg Ballard. Most believe that it wasn't so much voter validation of Ballard, but anger and repudiation of the incumbent.

Peterson lost when the doors of perception swung against him. He was blamed for the property tax crisis, aggravated by the fiscal need to raise income taxes by 65 percent to keep the city's bond rating from declining, an event that would have cost the city millions of dollars in interest. A week after the election, Standard & Poor's upgraded its Indianapolis rating to AAA.

Peterson's defeat was quickly followed by an Indianapolis Star/WTHR-TV poll that showed Daniels trailing the two Democrats challengers — Jim Schellinger and Jill Long Thompson — though within the margin of error. His approval rating was a “dismal” 40 percent.

Now, less than a year before the 2008 gubernatorial showdown, some of the basic premises surrounding a theoretical successful Daniels re-election campaign lay exposed in the wreckage of more than a half dozen mayoral defeats.

Look no further than Greensburg, where Mayor Frank Manus was defeated despite some 4,000 jobs coming with a new Honda plant that was announced in the summer of 2006. Or Anderson, where Mayor Kevin Smith had put together one of the most impressive economic development programs in the state that helped this rustbelt city land the Nestle plant.

In West Lafayette, Mayor Jan Mills lost despite a new Toyota plant coming nearby. Jeffersonville Mayor Rob Waiz stood beside Gov. Daniels in announcing MedVenture Technology's relocation from Kentucky and a big expansion of Jeffboat. Waiz lost in the primary to former mayor Tom Galligan.

Franklin Mayor Brenda Jones-Matthews was defeated by an independent despite helping bring in Japanese companies like Nishina and KYB Manufacturing. Gov. Daniels joined Jones-Matthews in 2005 to announce the expansion of Japanese-owned NSK Precision America that brought its corporate headquarters to Franklin.

The defeats of these mayors and others like Al Huntington in Madison and Kevin Burke in Terre Haute — all of whom helped land new plants or job expansions — is an all-too-real reminder that big economic development gains are not enough to power the presiding executive to further terms.

The reasons mayors go down in defeat are many. Conventional wisdom suggests that if a mayor lands an economic gem like Honda, this surely has the power to neutralize a feud with a firefighters union or a water utility dispute. In Mayor Manus' case he found himself boiling over local water issues and other insensitivities.

In Indiana, solid economic gains no longer ensure re-election. The perception game becomes prescient over solid facts. Many observers believe the property tax “crisis” that continues to be extensively covered by the Indianapolis media spilled over into cities where there was no such crisis.

The re-election campaign of Gov. Daniels is based on an array of big economic gains like Honda, Toyota, Dreyfus, Nestle, MedVenture and dozens of others. The new Colts stadium will be unveiled in September 2008. Major Moves construction will begin in St. Joseph County, Lakeville, Westfield and Kokomo. The Norwest Regional Development Authority is beginning to fund marinas, parks and transportation in Lake and Porter counties. The hope is that with thousands of new jobs - Major Moves was billed as the “jobs bill of a generation” - unemployment will dip below the national average and personal income will increase.

“There have been thousands and thousands of jobs announced all over the state,” said Michael Davis, political director for the Indiana Chamber of Commerce. “It's more perception than reality.” Even with the new plants, many old-line manufacturers are closing. This will continue no matter who is governor.

The perception problem facing Gov. Daniels is that the property tax crisis - born out of the administration's greatest political miscalculation to date when he didn't get behind Sen. Luke Kenley's proposals unveiled last March - seems to be overriding just about everything else. How he handles the property tax reforms between now and March 15, as well as the Kernan-Shepard Commission government reform report, could determine whether he will join Joe Kernan as an Indiana governor who couldn't win a re-elect.

Daniels, who trailed Kernan by more than 10 percent in early 2004, will have plenty of themes to bring to voters, like a two-hour trip from Elkhart to Indianapolis with no stoplights. Or expanding Wi-Fi thanks to the telecommunications reforms of 2007,. This will allow a resident of say, Wrights Corner, to conduct business via the Internet with someone in China. Or the extensive trails systems being built on discarded railroad tracks.

Before Daniels arrived on the scene, a number of reformers wished for a governor who would make the hard policy choices without an obsession with re-election. Those notions are closer to reality now than they've ever been.

And I'll never forget something the Governor told me on the way to Tipton where he helped break ground on a new 1,000-job transmission plant: “If I lose, it will be a long time before this state takes reforms seriously again.”

Howey is publisher of Howey Politics Indiana at www.howeypolitics.com