Bracing for Another Storm
Recovery Gauge: Patch towns' income tax receipts tell a story of a post-recession rebound
The good news is income tax revenue is up for all Patch towns.
The bad news has nothing to do with income tax and, instead, comes in the form of cuts in financial support that flows from the state through the county down to cities.
“I’d love to be able to have that income tax increase and have that at least stayed the same in which case we’d have real net gains,” said Dave Coffee, finance director for Kent. “But because of that, we’re still backsliding overall in our total revenue projections.
“I don’t have any reason to think that’s going to change going forward, so that continues to challenge us with the need for Kent to try to grow our tax base and for us to continue to look for ways to reduce our expenses,” Coffee said.
Over the years, the state has reduced contributions to the local government fund, which has made money available for basic operations. More recently, there have been a number of changes in taxes that are dispersed funding to cities:
- The tangible personal property tax was phased out in 2011. Tangible personal taxes are paid on physical property excluding land or buildings and does not include stocks, bonds or deeds.
- The estate tax will be repealed Jan. 1, 2013.
- Municipalities will no longer receive funding from the Commercial Activity Tax, an annual tax imposed for the privilege of doing business in Ohio measured by gross receipts from business activities in Ohio.
Cities are also expecting property values and by default property taxes, their second largest source of revenue, to decrease with the completion of the 2013 reappraisal process. Every six years, county auditors review every individual property and determines its fair market value. Housing values have remained unstable the past few years — an after-effect of the recession.
“The long-term implication is that the state government has decided to pass the burden of raising taxes down to (the) local level down to counties, to school districts, to cities and villages to offset the $8 billion budget deficit that was incurred in the last biennium and was part of the (state) budget process last year,” said Kent Scarrett, director of communications at the Ohio Municipal League, a nonprofit membership association that serves Ohio municipal government. “I don’t know how they expect our communities to provide services without (state) funding.
“I don’t know how they can expect us to continue to go to the taxpayers that they’re trying to protect when they depend on police and fire and roads and safe water and all the things that are delivered on a service level from local government,” Scarrett said.
In response, some cities have or will turn to voters to approve an increased income tax rate. Cities are trying to do more with less — or write grants to get more. Most communities are focusing their efforts on economic development to attract new residents and businesses, thereby increasing the income tax base to offset the difference. Many city leaders are tapping into cash reserves to bridge deficits.
They’re bracing for the storm.
“I don’t think any city’s out of the woods yet,” said Fairlawn Mayor William Roth.
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Editor’s Note: In this series, Patch gauges the recovery of 18 Ohio communities based on income tax receipts since the Great Recession. Find their individual stories Monday on Patch's Ohio news sites.