Upper Arlington News

Financial task force says UA should charge more

In addition to higher income tax rate, report suggests increase for services, programs

By

A 13-member panel charged with reviewing Upper Arlington's financial outlook and strategies last week recommended an income tax increase and higher fees for local services and programs to address the city's deteriorating infrastructure.

The Upper Arlington Citizen Financial Review Task Force told city officials June 5 that UA is lagging in funding capital improvement projects and must find new revenue sources to address the deterioration of local roads, sewer, water and stormwater systems.

The task force, which was appointed by Upper Arlington City Council last November, provided a 23-page report to council during last week's special meeting. It came after task force Chairman Rich Simpson, a UA resident and dean of Capital University Law School, announced last month the panel would recommend a 0.5-percent income tax increase -- which if approved would bring the city's income tax rate to 2.5 percent -- in November.

"This was a very intense process, I will say," Simpson said.

The report indicated that 12 of the task force's 13 members reached consensus on its recommendations. It also said a 2.5 percent income tax not only would bring the city in line with Columbus, where many UA residents work and to which they pay income taxes, but also would generate $3.5 million annually.

The task force reasoned that less than half of Upper Arlington taxpayers would pay higher taxes, primarily because the proposed tax would mostly affect those who work in the city. It would not apply to pensions or Social Security income for senior citizens.

The report concluded that additional revenue generated by the increased tax would allow the city to address approximately $113 million in infrastructure needs over the next 10 years.

"City council should adopt a new policy, similar to the existing policy allocating 13 percent of income tax revenues to capital improvements, making it clear that the revenues raised by the increased income tax will be used primarily to pay for capital improvements, including full implementation of the 10-year CIP (capital improvement plan)," the report stated. "The policy could be based on a percentage of total income tax collections -- e.g. 20 percent -- or a fixed dollar amount -- e.g. $5 million per year -- or another formula that will assure adequate funding of capital improvements and restrict the usage of such revenue to fund general operations except in extraordinary circumstances."

John Ness, president and chief executive officer of ODW Logistics Inc. and chairman of the task force's capital improvements subcommittee, said the extra money is needed because capital improvements are the biggest challenge to maintaining UA's quality of life.

"The consensus is that we have major infrastructure issues in the city," he said. "This is really where the issue is, and something that is critical to our city. Quite frankly, we're behind."

The task force's cost reduction subcommittee noted the city is operating with 30 fewer employees than five years ago, which has produced $3.4 million in savings.

It also noted the city's $207 per capita costs for police expenditures and $247 per capita expenses for fire services are the lowest in central Ohio and among Ohio communities with similar demographics and populations.

"We believe on the operations side that no additional revenues are needed and the city can proceed (without further reductions)," said Jack Hershey, associate vice president of government affairs at Ohio State University and chairman of the cost reduction subcommittee.

The revenue subcommittee, however, concluded that in addition to an income tax increase, some fees should be increased for utilities, parks and recreation and other programs and services to offset the expense of providing them. That also would help fill the $6 million annual gap in funding that was lost by the elimination of the Ohio estate tax and reductions in Local Government Funds, the report stated.

"One, we have done just about everything we can do to be as efficient as we can and still deliver the types of services our citizens expect and, two, we need more money," said Michelle Hoyle, who chaired the task force's revenue subcommittee. She is a former budget manager for the city of Dublin. "We can't rely on the Local Government Fund and the estate tax."

Council members did not take public comment during the June 5 meeting, but Upper Arlington Mayor and Council President Don Leach promised there would be public meetings on the report and its recommendations.

Council members also asked a series of questions during the roughly two-hour presentation.

Councilman Erik Yassenoff said he "has a lot of trouble with an income tax increase."

Some also questioned whether an increase to the property tax might be a better option, but the task force concluded that local real estate taxes have been "flat" in the city and the real estate market "remains uncertain."

"We went over the property tax and, honestly, one of the things we considered is the city has not looked much at property tax, and we're leaving that in the purview of the schools," Hoyle said. "Right now, a resident of Columbus who works in Arlington pays part (0.5 percent) of that income tax to Columbus when in fact, a person who lives in Upper Arlington and works in Columbus pays nothing to Upper Arlington."

According to the task force, the income tax is the city's largest source of revenue. Last year, it generated $16.8 million, whereas only 9 percent -- roughly $10 million annually -- of the city's property tax goes to the city. The balance is directed to Upper Arlington schools and Franklin County.

Assistant Finance Director Brent Lewis said Upper Arlington established its first income tax at 1 percent in December 1968.

The local income tax rate was raised to 1.5 percent in November 1975, Lewis said, but the last increase was in June 1983, when it went to 2 percent.

The task force's full report is available online at uaoh.net.

Comments