By Sue Botos
Although no decisions have been made regarding the placement of an income tax increase on the ballot this year, administrators are still considering this as a way to relieve some of the pressure on an ever-tightening general fund.
“This is a topic which will require considerable discussion before legislation is drafted,” noted Mayor Pam Bobst at a recent City Council committee session. She emphasized that no conclusion has yet been reached, and that any numbers cited are for discussion purposes only.
The current 1.5-percent income tax has been in place since 1977. Council is considering drafting legislation calling for a hike of between 0.25 and 0.50 percent, but voters will have the final say on the measure, possibly on a September primary ballot or during the November general election.
Giving a brief history of recent state budget cuts, Bobst said that 18 months ago, in an effort to erase an $8 billion deficit, Gov. John Kasich shut down several revenue streams to municipalities, schools and libraries, including the tangible personal property tax, kilowatt hour tax, local government fund and, largest of all for Rocky River, the estate tax. In total, the city will subtract an additional $3 million in state income this year.
During her recent state of the city address, Bobst noted that last year $954,000 was saved through furlough days, a delay in Fire Department raises, retirements and a reduced Municipal Court caseload resulting from the establishment of the North Olmsted Mayor’s Court.
“The city will receive some distributions from the estate tax through 2013 for individuals who passed away at the end of 2012, but the loss of this tax on Jan. 1 of 2013 (was) very difficult,” Bobst noted. She reported that over the past several years, revenue from that tax has averaged $2 million to $2.5 million, going as high as $4.4 million.
“These funds were always used for capital improvement, equipment or projects and never for operating expenses,” Bobst said. “The loss of that amount in an environment of EPA mandates and growing infrastructure needs (and) capital needs was breathtaking,” she added, pointing out the abrupt way in which the state discontinued the funds.
After weighing several revenue-generating options, Bobst said that an income tax raise “makes the most sense.” The increase, she said, would be used for capital improvements, infrastructure or equipment. Bobst noted that the city has made several moves, including partnering with the Cleveland Division of Water on water line projects and securing SWIF (Surface Water Improvement Fund) grants from the Ohio EPA for stormwater management demonstrations on the City Hall campus. But many paving projects still remain.
Even though some of the income tax scenarios under consideration by council could net an additional $2 million to $3.5 million, an amount equal or more than estate tax funds, Bobst pointed out that eventually state and national EPA mandates will require massive projects and expenditures. “So far the EPA has been willing to move at a slower pace, but their orders and findings indicate that much work remains to be done,” Bobst said, adding that so far, projects have been largely financed by grants and zero-interest loans.
Bobst further explained that an election is required in all cases where a city seeks to tax income by more than 1 percent. She said May 8 is the deadline to file for the Aug. 6 special election, a date Bobst said would be too soon to go to voters. The other alternatives are a Sept. 10 primary, with a June 12 filing date, and a Nov. 5 general election, with an Aug. 7 deadline.
“It makes sense to have the election in September or November, as there is already cost associated with those elections,” Bobst stated, noting that if placed on the August ballot, the city would be responsible for about $44,000 in expenditures.
The issue of refuse collection, emphasized Bobst, is a separate matter, with the exception of $610,000 in equipment expenditures needed this year for upkeep of compactors and scooters. “The two issues are separate, and people should not think that refuse will be unchanged if an income tax increase is passed, because work still needs to be done in refuse and recycling,” she said.
In addition, HB 5, the municipal income tax conformity issue, is also unrelated. Bobst reported that at this time, it does not have a direct impact on discussion of an income tax hike, but “it is being watched closely.” If passed as written, the city stands to lose an additional $553,000.