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City feels pinch of falling income-tax collections
(by Sue Reid - April 29, 2010)
City feels pinch of falling income-tax collections
By SUE REID
Solon's income-tax shortfall has grown, Finance Director William Weber told City Council's finance committee last week.
"We do have reserves but are eating away at them," he said.
For the first quarter of 2010, the city collected $8.2 million in income tax, he said. That is down $931,000 from the collections for the first quarter of 2009, which were at $9.1 million.
Although it's not a fair comparison with 2008 because of an unusual spike in income-tax receipts that year, Mr. Weber said, in comparison with the first quarter of that year, the shortfall for the first quarter of 2010 is $2.5 million. Collections for the first quarter of 2008 were $10.7 million.
The city receives 2 percent municipal income tax, which taxes the wages of workers in Solon. Of the income-tax revenue, three-fourths are used for general-fund operations, which is primarily payroll, Mr. Weber said. One-fourth of the city income tax is used for infrastructure contracts, such as the Pettibone Road reconstruction project, he said.
Mr. Weber told the committee he contacted the city's larger employers and found they did not pay the usual bonuses in the first quarter of this year as they had in first quarters of previous years. In addition, he said, the downturn in the economy, which every city is experiencing with income-tax receipts, is contributing to Solon's shortfall.
Mr. Weber said the general-fund cash reserves also are declining. As of the end of March, they were at $16.9 million. The city began 2010 at $17.8 million in reserves. "We were fortunate to have the reserves before the downturn in the economy," he said.
"This is concerning," Councilman Lon D. Stolarsky said.
"We have the reserves and can weather the storm, but we want to be proactive and ahead of the curve in terms of tightening our belts before things get bleak for us," Mr. Stolarsky said. The hope is that the economy will pick up, and "this is more of a bump in the road," he said.
"We have the reserves to cover that bump, but it's always good to re-look at your spending because you can always make some improvement," Mr. Stolarsky said. He told the committee that the mayor realizes the seriousness of this and is prepared to take steps to tackle the problem.
Mayor Susan A. Drucker said that three-year projections from each department are due to her this week with a final report slated for May.
"I am not waiting until the end of the year to make changes," Mrs. Drucker said. "I don't want to wait until the city is in trouble to start worrying about finances. I want to stay ahead of the curve and protect our city's financial position.
"We have to remain strong for our businesses and our residents, and I will make sure we do that," Mrs. Drucker said.
She said she will review each department's proposed budget for the next three years and also which department is expecting retirements.
"I won't say those individuals will not be replaced," she said, "but if it is a position we can make work with existing personnel, then that is my goal."
Mrs. Drucker said, although it would be easy for her to make decisions based on the dollars the city has today, she wants to make long-term decisions that will protect future administrations.
"You need a long-term plan," Mrs. Drucker said. "You just can't make decisions based on today. It's my responsibility to make sure we have a strong future."
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