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Year’s income tax receipts up after slow start
(by Sue Reid - August 02, 2012)
Year’s income tax receipts up after slow start
By SUE REID
Solon’s finance director is satisfied with about $20.6 million in income tax receipts for the first six months of the year, which is less than half a percent behind last year's total receipts through June.
Dennis Kennedy said the estimate for the entire year at $38 million is a conservative one due to the volatility of the economy.
“Because of the uncertainties of the economy and world markets, if something hits, it shows up in income tax receipts far quicker than it does in other revenue sources like property taxes,” Mr. Kennedy said. That is because business owners make cuts to payroll or freeze wages in response to an economic downturn.
“For the sake of projecting for this year, we are better off counting on a more conservative number,” he said. “It makes your budget a little more responsible.”
Although the year started with lower-than-predicted collections in January, the city has recovered sufficiently and continues to record total actual collections in excess of original monthly projections, Mr. Kennedy said.
In fact, March and April set all-time highs for income tax collections in the city at $3.419 million and $5.493 million, respectively. Further, collections for February, March and April were the highest monthly totals collected in the city’s history, Mr. Kennedy said.
“It is a good sign that the businesses here are still strong, and we have a good commercial base,” he said. “All in all, on a bigger scale, it is representative at least of a little comeback from the economy from a few years ago.”
It’s still important to note that, despite this upswing, things can change, Mr. Kennedy said.
“Depending on what happens with the stock market and what kind of economic crisis we encounter overseas, those things could have immediate impact on how businesses here budget,” he said. “It would impact their operations.
“Because of the uncertainty of the level of refunds that still may potentially be generated prior to year end, we will hold off on revising the original projection for the year.”
Individual collections are the only source running behind comparative to 2011 tax revenue, Mr. Kennedy said. Some of that decrease may be attributable to residents working in Beachwood, where the tax rate was increased to 2 percent last year.
“That increase would allow those residents a full credit on their 2011 taxes and eliminate a 0.5 percent amount due to Solon,” he said.
The city receives 2 percent city income tax, which taxes the wages of workers in Solon. Of the income tax revenue, three-fourths is used for general fund operations, which primarily is payroll. A fourth of the city income tax is used for infrastructure contracts, such as road projects.
Income tax revenue is the “biggest component” in terms of revenue for the city, Mr. Kennedy said.
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