While village employees have been slashing the 2009 budget, a look into revenue shows the failing economy shoulders most of the blame.

While village employees have been slashing the 2009 budget, a look into revenue shows the failing economy shoulders most of the blame.

With a 2 percent income tax rate on individual earned income and corporate net profits, income tax provides most of New Albany's general fund revenue.

"Right now income tax makes up 79.3 percent of all general fund revenue," Jamie Nicholson, village finance director, said. "Given the current uncertainty in the market and the economy we're budgeting fairly conservatively."

As companies across the country post lower-than-anticipated earnings, New Albany industries are not exempt.

While not faring as poorly as other similar companies, Abercrombie and Fitch recently reported a net sales decrease of 8 percent for the entire company. A decline of 8 percent also was reported for Abercrombie and Fitch in third quarter results.

Nicholson said a decline in profits for local companies means less revenue for the village.

"I don't want to speak about one specific taxpayer, but we're expecting full net profits to be lower and that would reduce the tax we would receive," he said. "We also (have) tax withholdings from taxable wages, so if companies reduce hours or employees that would also reduce taxes."

While companies may be seeing less in revenue, the village is also seeing fewer people moving to New Albany, which causes a small impact on general fund revenue.

"(Housing) permits combined, along with police fines, and those only represent about 3 percent of total income, were down in '08 and we expect them to be down even lower in '09," Nicholson said. "It's not dramatic, but it's down."

The village staff had been planning for an 18-month economic downturn, they're now budgeting under the assumption that economic problems could last two or three years.

jnoblit@thisweeknews.com