Thursday, October 6, 2016
The 0.5 percent income tax increase Warren residents are being asked to approve in November is by no means a money grab. Indeed, it could be argued that Warren Mayor Doug Franklin and city council were forced to seek the additional revenue because of circumstances beyond their control.
First, there was the Great Recession that began in December 2007 and lasted until June 2009. It resulted in the loss of hundreds of thousands of jobs nationwide and a decline in tax revenues at all levels of government.
Second, there were the cuts in state funding for local governments that affected counties, cities, townships and villages across Ohio.
As a result, Warren is anticipating $870,000 from the Local Government Fund and $47,000 in State Government Funds for the 2016-17 state fiscal year. By comparison, in 2011, it received $1.5 million from the LGF, and $230,000 from the SGF.
Third, Warren’s operating budget was further roiled by the elimination of the state estate tax. In 2011, Warren collected $465,000 in estate taxes. In 2017, it will receive nothing.
Fourth, the city of Warren is confronted with the same problems that are afflicting many Mahoning Valley communities: loss of jobs, with the subsequent erosion of the tax base; a decline in the population; and, an increase in the number of senior citizens who are living on fixed incomes.
All these factors serve to bolster the arguments being made by Mayor Franklin and members of city council for the tax increase.
Indeed, a citizens committee that was impaneled to conduct an independent review of the city’s operating fund, came to this stark conclusion: “By any reasonable standard, the City’s General Fund is in serious financial distress.”
Among the committee’s findings:
The General Fund is facing an operational deficit of between $1.4 million and $1.8 million in 2016.
All cash reserves have been depleted, and no excess funds remain to be utilized for future deficits or emergency expenses.
Since 2008, expenses have been cut by $5.3 million – a 17.4 percent decrease in spending.
Since 2008, revenues have dropped by $7 million – a 23 percent decrease.
The 0.5 percent increase in the city’s income tax rate would generate between $3.5 million to $4 million a year.
The money is earmarked for police, fire and roads.
If voters reject the tax increase, Mayor Franklin and others have warned that 10 police officers would have to be laid off. Approval, on the other hand, would result in the hiring of eight to 12 new officers.
As for the fire department, a two-year federal grant will result in additional eight to 12 firefighters being brought on board. The mayor has pledged to set aside $1.05 million out of the new tax revenue so the new firefighters would be retained.
With regard to the roads, the city would spend $500,000 a year on resurfacing and other improvements.
While the administration and the citizens committee are on the same page when it comes to spending priorities, they part company on the creation of a reserve fund and other money for economic development.
Committee members would like $200,000 set aside each year, but the mayor says the city’s financial challenges will take some time to address even if the income tax increase is approved.
While we agree that a surplus fund is good public policy, we believe the first order of business for city government is to get its budgetary house in order.
Fifteen years have passed since the city’s income tax rate was increased, and it has been that long since government had a road maintenance program.
Residents should know that their city isn’t alone in seeking a revenue boost through a tax increase. Almost 40 cities and villages hiked their local income tax rates in 2015 and this year, while others, including Cleveland, Athens and Newark, are going to the voters in the November.
Warren officials have been good stewards of the public treasury – as evidenced by the analysis of the citizens committee.
We believe residents should acknowledge such responsible governance by approving the 0.5 percent income tax increase in November.