Gahanna considering income-tax rate increase
Proposal would increase credit from 83.3 to 100 percent for residents paying another municipality's tax
In what she called one of the most important messages she has delivered to Gahanna City Council, Mayor Becky Stinchcomb asked council on Jan. 14 to let residents decide the future of the city by placing an issue on the May ballot that would increase Gahanna's income-tax rate from 1.5 to 2.5 percent.
If the issue were placed on the May 7 ballot and approved by voters, the city's income-tax rate change would be effective beginning in January 2014.
In conjunction with the request, Stinchcomb is requesting that council adjust the credit given to residents who pay income tax to other municipalities from 83.3 to 100 percent.
City attorney Shane Ewald said council must approve a resolution with ballot language Feb. 4 in order to meet the Franklin County Board of Elections deadline for the May ballot.
Stinchcomb said the city's tax rate hasn't changed since 1977.
To have a balanced budget for the future, she said, Gahanna needs either increases in revenue or many additional and serious cuts in operations and services that are provided to residents.
"It is my sincere belief and the belief of this administration that we cannot expect to create a competitive, excellent, sustainable and healthy city -- an exceptional city -- as demanded by our mission and vision, with an outdated and insufficient revenue formula," she said. "The voters have to decide to have the people who work here invest in our city at the same rate at which the people who live here and work almost any place else invest. The formula we are recommending actually will result in local tax savings for the majority of our taxpayers.
That majority is about 8,500 residents who live in Gahanna but work where a higher tax rate is imposed.
Finance director Jennifer Teal said she soon would make a tool available online at gahanna.gov, where residents could calculate what the proposed tax rate change would mean to them.
For tax year 2011, Teal told ThisWeek, Gahanna had 19,584 working residents who filed with the Regional Income Tax Agency. Some work in nontaxing districts; some work in cities with taxes ranging from 1.5 to 2.5 percent. Those who pay income taxes elsewhere get an 83.3-percent credit in Gahanna. Under Stinchcomb's new proposal, they would get a 100-percent credit.
Teal said the goal of the tax change would be to fairly allocate the cost of city services among users.
The recommendation is a 2.5 percent tax rate with a 100-percent credit for taxes paid to another municipality, she said.
"It meets the bill as we move forward," Teal said. "This is the recommendation that fairly allocates the cost of city services among users."
Teal reviewed the five-year financial forecast previously presented to council, illustrating an average $8 million deficit each year.
Stinchcomb said the proposed reform would close the $8 million gap the city faces and would align the tax structure with the direction of the region.
"Most of our residents will see little to no change in their local tax bill, and they will reap the benefits of the investment we will be able to make in the community," she said.
Assistant city administrator Brandi Braun said Gahanna has been studying the feasibility of changing the income-tax structure since a group of volunteers, as the citizens financial advisory committee, recommended in 2010 that the rate be changed to 2.5 percent.
"Given the economic conditions coupled with our healthy reserve fund balances, we did not feel 2011 or 2012 was the right time," Braun said.
She said the city has been implementing many of the committee's recommendations, including the creation of a five-year capital improvement plan, protecting and strengthening economic development initiatives, determining core service levels and establishing a comparative performance measurement system.
All documents provided during the Jan. 14 presentation by the Gahanna administration, including the five-year forecast, the 2013 budget, the five-year capital-needs assessment and community survey, are online at gahanna.gov.