Credit to be vetted: City needs source for additional income, leaders say
Despite receiving information about the difficulties in collecting income tax from people who live in Wapakoneta and work in other municipalities, city leaders still want to pursue a proposal to scale back or to end the city’s income tax credit.
Wapakoneta Mayor Rodney Metz and 3rd Ward Councilor Bonnie Wurst say the proposal must be fully vetted because the general fund needs an influx of money.
Councilor-at-large Tom Finkelmeier Jr. proposed earlier this year reducing or eliminating the income tax credit provided to city residents who work outside the corporation limits. The city of Wapakoneta enforces the state minimum allowable income tax of 1 percent, while other municipalities are typically at 1.5 percent. The city provides a credit of 1 percent to those people working outside the city.
“I believe it is very necessary to continue discussing the proposal because the city does need some increase in revenue if we want to improve our streets and provide better safety services,” Wurst said after Monday’s Wapakoneta City Council meeting.
Finkelmeier proposed the idea after Finance Committee members realized income tax receipts have stagnated while costs to operate the city continue to increase because labor and material costs continue to rise. In 2011, income tax collections totaled $2.109 million in 2011, down from $2.119 million in 2010. The 2011 collections are an increase from $2.065 million in 2009.
If the income tax credit is eliminated, it would not go into effect until 2013 and thus would not affect income tax collections this year.
At a Feb. 6 council meeting, Wurst reported the elimination of the income tax credit would generate approximately $485,000 more in income tax revenue for the city.
Income Tax Supervisor and Office Manager Diana Blackburn told Finance Committee members during a committee meeting held Feb. 8 to collect the income tax from people working outside the city would be difficult and would depend on people and businesses reporting the income and paying the tax.
Blackburn explained to committee members the income tax would be complicated to collect and the city may have to bill residents to collect. She estimated the city would receive only approximately $300,000 because some tax would never be collected and there would be increased expenses to collect the tax dollars.
Wurst told the Wapakoneta Daily News that Finance Committee members continue to believe residents would not support a 0.5 percent income tax increase, but the city needs to find a way to increase revenue.
Wurst confirmed all city residents are supposed to file a city income tax return, but Blackburn told her “quite a bit of money would slip through the cracks.”
Metz supports Finance Committee members’ efforts to pursue eliminating the income tax credit and to continue researching the benefits behind the proposal.
“I understand her (Blackburn’s) concerns, but my thoughts are we really do not know how difficult it will be until the legislation is passed and we work on collecting the income tax,” Metz told the Wapakoneta Daily News. “There are a lot of communities who are doing exactly what the Finance Committee members are talking about — they do not give 100 percent relief.
“I will have the chance to talk to some of the other mayors in the next 60 days and learn how successful their collection rates are,” the mayor said.
He advised Finance Committee members to continue their research and investigation into the matter.
Wurst also addressed the entire budget with general fund appropriations totaling $5.4 million. Revenue is estimated at $4.26 million with a $1.2 million cash carryover.
“It is a little bit tighter than it has been in previous years but for the past three years the city income tax has been lower than expected,” Wurst said after the city’s 2012 appropriations legislation received its first reading. “There is not deficit spending, but there is no extra funding for anything above and beyond what is needed.”
Wurst also called a Finance Committee meeting for 4 p.m. Thursday to discuss changes in the budget appropriations ordinance, which must be passed and in effect by April 1, regarding expenses in the Recreation Department budget.
“The Rec Board has suggested shifting some money among line items within the fund,” Wurst said. “The shifting of money does not affect the bottom line and should not delay the budget and does not affect the overall budget. It could affect the ordinance because an amendment might have to be made.”