City of Toledo tax renewal up for voteWritten by Caitlin McGlade | | firstname.lastname@example.org
Layoffs and cutbacks would abound if voters rejected the 3/4 percent payroll tax March 6, according to city officials.
This is not a new tax but rather a 28-year-old source of city revenue that appears on the ballot every four years for renewal. People who live or work in Toledo pay a permanent 1.5 percent tax plus the “temporary” tax, which levels out to 2.25 percent.
Between years of slumping income tax revenue, which has only recently started to recover, and the state’s disappearing allowances for city governments, this vote might be more important than ever, said Councilman Joe McNamara, a Democrat.
The city would have to lay off as many as 500 employees in public safety, all recreation staff employees and diminish or end road paving altogether if Toledoans voted down the tax, McNamara said.
“You could almost lose half your police force, half your fire force, half of just about everything,” Mayor Mike Bell said. “It becomes an ugly scenario.”
The temporary tax brings in about $51 million annually. It fuels the capital improvement fund, public safety and the general fund. Up until recently, the three split tax proceeds evenly. But the recession has pushed the administration to move money from the capital improvement funds to help pay for safety. The city has not moved the maximum amount allowed, which is $17 million, Bell said.
If it passes, the city plans to spend at least $31 million on street repair.
The 3/4 percent earned income tax doesn’t cover the budgets of one of the safety departments. The police budget reaches more than $72 million and the fire department’s budget is about
$60 million, said City Councilman George Sarantou, a Republican, who chairs the finance committee.
The city’s finances have been gloomy since 2008, when cumulative income tax collections took a 14 percent dive in just one year. Collections bowed more than 11 percent between then and 2009, only to creep up by 2.5 percent by 2010. All the while, the consumer price index, which measures inflation, hovered high above what the city was pulling in. The index rose by 5 percent between 2007 and 2008, stagnated for a year and continued to rise.
City income tax collections have risen since 2009, actually jumping by about 8 percent between 2010 and 2011. Even still, the city is pulling in about as much as it did in the early 2000s, with the inflated consumer price index of today.
“Even though our local income tax revenue is increasing, our state revenue is flatlining,” Bell said.
Shrinking state budget
Gov. John Kasich’s budget cuts included shrinking city allowances. In 2007, Toledo received $25 million from the state. By 2013, the city will receive $8 million. Estate tax revenue will also vanish.
Prior to these changes, when Bell took office, he was staring down the face of a $48 million deficit. The administration did not lay off employees. Instead, unions made concessions on deals such delaying compensation time payouts. The city became more aggressive about delinquent taxes and went after collections that hadn’t been made. The mayor’s office now has no secretaries, so sometimes if constituents call they might get voicemail, said Jen Sorgenfrei, spokesperson for the mayor.
“We have gone and gotten money out of every nook and cranny around,” Bell said. “We don’t have that option anymore.”
The tax first appeared in the early 1980s. Voters had rejected a boost in income taxes prior, but in 1982 voters approved the 3/4 percent tax. The city was in morbid shape at the time, with no recreation department, closed pools and mounting fiscal problems concerning public safety, McNamara said.
The last year that Toledoans voted on the tax, 2008, the issue passed with 60.24 percent of the vote.
Shocked by taxes
Economist and conservative co-host of “Eye On Your Money” on WSPD Linda Bowyer said that the problem with city income taxes is that they are easy to vote for if you’re not the one paying them. This would include the unemployed and, in Toledo’s case, people who are living off of retirement pensions. She added that people who live outside Toledo, but work within city limits, do not get to vote on an issue that affects their taxes.
“It’s sort of taxation without representation,” she said.
Bowyer does not work in Toledo so the vote would not affect her. However, she said, when she moved here from Missouri some 20 years ago she was shocked by Ohio’s taxes. The city income tax is not something that every municipality has and is another example of the various government entities that tax citizens in the state, she said.
Sales taxes and property taxes tend to be other popular methods of generating city revenue. But the problem with sales taxes is that they place more of a burden on lower income people, because poorer people tend to spend a greater percentage of their paychecks on consumption, she said.
All other major cities in Ohio collect income tax. Columbus has the highest rate — at 2.5 percent — and Dayton, Toledo and Akron are all mid-range with 2.25 percent. Cleveland collects 2 percent and Cincinnati collects 2.1 percent.
“People in government will say ‘We need police, we need fire,” Bowyer said. “I’m not saying they scare people but to some degree they do because they say, ‘Look at some of the horrible things that will happen if we don’t pass this’.”
The question comes down to just how extensive the government should be, she said.
“Is the government necessarily responsible for parks and recreation?” she said. “Are there things that we have government doing right now that could be done by the private sector?”
Bell said the hardest part about explaining the tax is that tax payers havez have just endured the recession themselves, but to remember that this is not a new tax.
“It is essential to the survival of our city,” he said.