The City Budget and Finance Director provided a summary of the income tax receipts received by the city for calendar year 2006. Income tax receipts are a big deal because they fund 90% of the city operations, so we watch income tax trends closely. Unfortunately, the news hasn’t been good over the last 5 years and 2006 wasn’t much better.
The Budget and Finance Director provided a summary of the end of year income tax receipts for 2006. We had budgeted no net increase for 2006 income tax receipts, and the good news is that we came in $10,000 over the receipts for 2005, so we hit our budget target. The bad news is that our dependence upon Kent State University continued to increase and if Kent State’s tax contribution hadn’t come in $90,000 higher than last year, we wouldn’t have hit our budget target.
Roughly 90% of our general fund budget comes from income taxes, and close to 75% of our general fund budget is personnel costs, e.g., police officers, firefighters, plow truck drivers, etc. What that means is that our ability to pay even modest pay increases (just to keep pace with inflation), and our ability to offset rising health care and retirement costs, depends upon natural growth in income taxes.
With inflation rates hovering around 2-3% a year, and health care and retirement costs adding more costs on top of that, we really need a minimum of 5% annualized income growth to keep our finances whole. Unfortunately, we haven’t enjoyed that kind of growth.
Kent State Income Tax Receipts (35% of total city income taxes)
2002 to 2003 income tax receipts grew 3%
2003 to 2004 income tax receipts grew 2.5%
2004 to 2005 income tax receipts grew 2.4%
2005 to 2006 income tax receipts grew 2.5%
Overall City Income Tax Receipts
2002 to 2003 income tax receipts grew .8%
2003 to 2004 income tax receipts dropped (1.35)%
2004 to 2005 income tax receipts grew 5.96%
2005 to 2006 income tax receipts grew .1%
Overall, you can see the problem with income tax receipts, with 3 out of the last 4 years coming in less than 1% or in the red. Again, Kent State has been our best revenue asset, but even it’s stablizing impacts haven’t been enough to offset the declines citywide.
With the announcement of RB&W closing and Giant Eagle closing, we’re starting 2007 some $125,000 in the hole, so we’ve really got to get aggressive in our economic development efforts to replace these revenues and at least hold the line in income tax revenues.