[ back ]
City Hall braces for income-tax shortfall
(by Sue Reid - November 25, 2009)
City Hall braces for income-tax shortfall
By SUE REID
Due to a shortfall in income-tax collections this year in the City of Solon, amounting to $3 million thus far, it will be difficult to estimate next year's revenues, Finance Director William Weber recently told City Council's finance committee.
He said that's not just the case for Solon but for every city that depends on income taxes. Mr. Weber recently attended a seminar in Columbus conducted by the Ohio Auditor's Office which focused on the shortfalls in income tax revenue that all the cities are experiencing.
"Everyone is down," Mr. Weber said. "All cities are reporting their income tax collection is down in an amount less than last year's collection."
Solon's $3 million shortfall is out of an estimated $39 million to be collected in 2009. Mr. Weber said it is uncertain how long the decline will continue, and the general fund cash reserves are also declining little by little.
"We began the year at $19.745 million, and at end of October, we were at $19.2 million," he said. "There will probably be a further decline by the end of November and even more by December."
Mr. Weber said that revenue is equaling expenditures over the last couple of months. "That is not because we are over budget," he said, "but rather due to shortfalls in revenues of $3 million. We are under budget as far as expenditures are concerned."
The reason for the shortfall is the economy and the loss of jobs in the area, he said. "That's our bread and butter," Mr. Weber said of the income tax collections.
The city receives 2 percent city income tax, which taxes the wages of workers in Solon. Of the income tax revenue, 75 percent goes toward the city's general fund and 25 percent to the infrastructure fund, which is for capital projects related to streets and other infrastructure items.
Solon's income tax collection has grown each year, Mr. Weber said, as it has in all other cities. The trend of it dropping began in January of this year, he said.
"If the number of workers is on the decline, that's less revenue," Mr. Weber said. "There are less wages being paid in Solon which means less taxable income."
"We, fortunately, have not seen many closures of businesses, but rather cutbacks," Solon economic development director Peggy Weil-Dorfman said. "That is good news."
To address the income tax shortfall, Mr. Weber said, his department, along with the city administration, is in the process of formulating a plan.
"There are several options," he said. "Perhaps we haven't even discovered the best option." One of those options, cutting expenses, "is definitely on the horizon," Mr. Weber said. "There should be some cuts put in place for 2010."
Mr. Weber said that once the new finance committee is in place next month, "we will get to work" on developing the plan.
Mr. Weber said he does not see the city's situation changing in the immediate future. "We just have to see how the general economy recovers, and we should be part of it," he said. "When that happens, it's anybody's guess, "but we are very fortunate to have built up the cash reserves during the past 10 years that will enable us to get through this economic downturn."
[ back ]
