Posted: 12:00 a.m. Sunday, Sept. 30, 2012

Beavercreek considering earnings tax

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By Amelia Robinson

Staff Writer

BEAVERCREEK —

Beavercreek City Council will likely ask voters to approve the city’s first ever earned income tax on the May 7 ballot.

City officials plan to discuss the proposed tax with residents at its Oct. 15 work session. A first reading of an earnings tax ordinance is expected to be presented at council’s Nov. 12 meeting, Beavercreek Law Director Stephen McHugh said. The earnings tax - likely would exclude most of those 65 and older and could exempt those younger than age 18. Specifics about the proposed earnings tax still are being developed. But if approved, residents would see a decrease in property taxes.

While some city residents have expressed reservations, city officials say the tax would even the playing field and allow the city to capture much needed money currently flowing to other municipalities because Beavercreek does not have an earnings tax.

City officials estimate that a 1.5 percent earnings income tax could add $10.2 million to Beavercreek’s coffers in 2014 — much of which is currently being collected by surrounding cities.

By the year 2020, the tax could generate $18.7 million and by 2017 would eliminate $9.6 million from three property tax levies that are collected now.

“If revenue comes in faster, we can actually go in and roll those off faster,” said Bill Kucera,the city’s financial administrative services director. “They (workers) are coming in and using (city) services when they are working here, but they are not paying anything. You are shifting some of the burden from the property taxes to the people who are working here.”

Beavercreek and Bellbrook are on a short list of Ohio cities without a tax on wages and company’s net profits.

Based on a city survey, about 25 percent of Beavercreek’s residents both live and work in the city. The bulk of those who work in Beavercreek already pay income taxes where they live.

Under Ohio law, taxes are paid first to the city where the employee works. If the city where the taxpayer lives has a higher tax rate than where he or she works, the employee pays the difference to the city of residence.

Officials from nearby cities anticipate losing thousands of dollars in revenue if the tax is approved in Beavercreek. The impact will vary by community.

    Resident concerns

    City officials still are developing the income tax proposal and said they received many questions at a recent work session designed to involve residents in the development of the proposal.

    In the past income tax proposals in Beavercreek has sparked voter protests and threats of recall from residents who said past administrations attempted to impose the taxes without voter input.

    At the September work session, Flo Thompson, the former leader of Tax Busters and the 1984 group Citizens for a Fiscally Accountable Council, said she’s been contacted by residents asking her to re-engage her anti-income tax efforts if the tax proposal is not appropriate.

    Clete Buddelmeyer, a resident and the outgoing president and executive director of Beavercreek Chamber of Commerce, questioned the impact the income tax would have on businesses currently not taxed on net profit by the city. The earnings tax would apply to the percentage of revenue earned by a business located in Beavercreek.

    Beavercreek resident Tony Corvo wondered what impact the income tax would have on the city’s younger families.

    “We are shifting the responsibility from people (older property owners) who have had their whole lives to pay and save money to young people,” he said at the meeting.

    Dean Vinson, who did not attend the meeting, said a tax could be a good thing for the city if funds are not influenced with “pet projects.”

    Vinson helped conduct research in 2003 and 2004 as part of a failed attempt to get council to place an income tax on the ballot. He offers an analysis of taxes in Beavercreek at www.beavercreektax.net.

    As a civilian project manager at Wright-Patterson Air Force Base, Vinson does not pay a local income tax because the base is a federal installation. The Beavercreek resident since 1995 would be taxed if the earnings tax was implemented.

    “I don’t want to pay more tax, but if you ask me what makes sense for the residents, I think the tax is a good idea,” he said. “It would lower the total tax burden over time. Instead of relying 100 percent on the property taxes, they (the city) would be able to benefit from income taxes from non-Beavercreek residents.”

    Why an earnings tax?

    Beavercreek officials say the city’s financial situation is prompting the call for a tax.

    Officials project a $2.3 million loss in funds through 2013 due largely to reductions from the state’s local government fund and the coming elimination of the estate tax.

    “It is not possible to for us to continue to operate at the same level of service with that level of change,” Beavercreek Mayor Vicki Giambrone said. “We have to be sure we can fund the basic city services.”

    Officials say the city in recent years has taken several steps to reduce expenses including cutting city departments down from seven to five, evaluating staff positions for consolidation and installing a fleet fueling station to reduce gas costs.

    Also to offset cuts from the state, the city and Beavercreek Township are asking voters in November to approve a 1.4-mil levy for continued funding of parks and the senior center. The levy would generate about $2.1 million annually for a consolidated district.

    Giambrone said $70,000 was saved by the decision to share prosecution services with Fairborn.

    “We are now saying we have been able to reduce costs and do things more efficiently. But we have a much tougher issue,” she said.

    Under the earnings tax plan being drafted, officials would not seek property tax renewals or would reduce requests starting with the 3.7 mill police levy which will expire in 2013. The city’s street levies — 1 mill and 2.6 mills — would be reduced or eliminated the following two years.

    Nearly 50 percent of the earnings tax revenues would be used to offset the loss of the property taxes and 11. 5 percent of the money would be used to offset the loss of state funding.

    The remaining 33 percent, about $5.85 million annually if the 1.5 percent tax is approved, would be used for capital improvements.

    David Beach, the city’s public administrative services director, said there is a $195 million laundry list of 200 outstanding capital improvement projects the city has few resources to address. The list includes streets, public buildings, bikeways, parks and recreation. Just for bridge and storm water projects there are projected expenses of $10.42 million to upgrade equipment and address flooding issues like Willowcrest Drive.

    “They (Willowcrest Drive) have had drainage problems since the 1960s,” Beach said. The city’s infrastructure will continue to deteriorate if not addressed, he said.

    “Five million dollars really doesn’t do much in a year, but it is a start,” Beach said. “It is a move toward a goal. Right now all we are doing is deferring problems.”


    Impact on other cities

    Officials from nearby cities anticipate losing thousands of dollars in revenue if the earnings tax is approved in Beavercreek. The impact will vary by community.

    • Kettering finance director Nancy Gregory said her city collects $38 million from a 2.25 percent income tax and projects losing $300,000 to $400,000 annually if Beavercreek voters approve its own tax.

    “I certainly don’t want to say that $300,000 to $400,000 isn’t important,” she said. “It doesn’t seem as significant, but that’s a lot of money.”

    • In Xenia, a city with a 2.25 percent income tax that collects about $11.15 million yearly, officials are exploring how a tax in Beavercreek would impact it.

    “It would be thousands and thousands of dollars,” city manager Jim Percival said.

    • The City of Centerville estimates it will lose about $250,000 annually from the roughly $11.5 million it collects annually on a 1.75 percent tax, city finance director Steven Hinshaw said.

    “It’s a concern. It is obviously going to have a negative impact on the city’s income tax,” he said.

    • Fairborn estimates losing about $62,465 of the $11.7 million it collects from a 1.5 percent tax that includes a 0.5 percent tax for fire and EMS that will expire in 2014.
    • Dayton Public Affairs Director Thomas J. Biedenharn said the city is awaiting soon-to-be released Census information before it can determine how many Dayton residents work in Beavercreek and how much may be lost. Any estimate would be a “wild guess,” he said.
    • Riverside acting finance director Thomas Garrett, a Beavercreek resident, said Riverside will lose about $23,000 of the $4 million it takes in annually. About 120 Riverside residents worked in Beavercreek in 2010.

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