Cities cry foul over budget cuts

Millions diverted away from cities in state budget, they say.

Over the last four years, Montgomery County had more than $15 million in local government funding slashed in state budgets that local officials say are unfairly punishing metropolitan areas.

Just this year Ohio lawmakers targeted revenue from automated traffic ticket cameras and cut a deal on racino license fee revenue that keeps millions flowing to the state while shorting Dayton and other cities of a potential windfall.

And a year after the legislature killed the estate tax in 2012, the suburban communities of Kettering, Centerville, Washington Twp. and Oakwood had already counted up losses of $9 million, with similar cuts snipping budgets of other big and small cities.

Ohio Gov. John Kasich speaks of the Ohio comeback in his nascent bid for the presidency, cited his balancing of the state’s budget with room to spare while cutting taxes by $5 billion.

But local officials are raising questions about the steady stream of cuts that are forcing painful decisions about whether to seek local tax increases or curtail public services, and they say the savings at the state level is extracting a heavy local price.

When the estate tax cut landed like a bomb on local budgets, Centerville City Manager Greg Horn said, “We can’t continue to take these kinds of hits.”

Today, he’s more emphatic.

“I’ve been in local government in Ohio for 35 years and I’ve never seen the relationship between state and local government deteriorate to this point,” Horn said last week. “It’s truly an ‘us versus them’ mentality. You keep thinking it can’t get worse and it continues to regress.”

As part of the deal for hosting the racinos, Dayton and the Youngstown suburb of Austintown were to receive $500,000 a year. But after years of wrangling, the promise wound up with the two receiving $1 million paid over two years. The state took the lion’s share of the $250 million in fees the racino owner pays to do business at the two locations.

The deal so infuriated Dayton Mayor Nan Whaley she questioned whether the city has a partner with the state.

“Over and over again, in the Statehouse they have no understanding in the tax system of how cities work and their value as economic drivers,” Whaley said.

Jim Lynch, spokesman for Gov. John Kasich, said the tax and budget policies are directed at one overarching goal — growing business activity in Ohio and creating a tax friendly environment. He cites job growth and $5 billion in tax cuts since Kasich took office as evidence the strategy is working.

“The governor is focused on growing the economy, and the economy is growing. We are seeing in many communities record revenues. Sales and income tax revenue is increasing. Economic growth is the number one way to support local government.”

But local officials say they are being put in a no-win box. In Centerville, full-time positions have dropped from 196 to 165 since 2000, while the paving schedule has gone from every 15 to 20 years to 25 years plus.

Montgomery County has had its local government fund cut by nearly half, from $32 million in 2011 to an estimated $16.8 million in 2015.

Dayton’s share went from $11.1 million to $5.8 million during that same span, county figures show.

The fight over the operation of automated traffic ticket cameras promises another blow. Dayton pulls in $1.9 million yearly from the cameras, while Trotwood and Springfield each receive more than a quarter million. State legislators upped the ante by legislating funding cuts equal to what the cameras bill drivers. However, what is billed is about 30 percent more than the cities collect, essentially making operation of the cameras a tax on the cities.

Lynch said local government funding is only a small percent of the support cities derive from the state budget. Eighty-five percent of the state’s general revenue fund, he said, filters down to schools and local governments.

‘I don’t understand what the strategy is’

Some fear the budget woes will get worse. A bill introduced by Ohio Sen. Kris Jordan, Chairman of the State Local Government and Veterans Affairs Committee and a foe of the estate tax, goes further, barring municipalities from imposing an income tax on non-resident workers.

“It would bankrupt center cities,” Whaley said. “Cities like Hamilton, Middletown, Piqua and other county seats would have significant problems as well. The money helps build infrastructure for those jobs. That’s why I lose my mind on this.”

Jordan didn’t return a call for comment.

Middletown Mayor Larry Mulligan, now in his eighth year, has overseen forced cuts of firefighters and police officer positions to respond to the revenue shortfall. The full-time Market President of First Financial Bank tries to see an upside.

“It’s driven some cuts, but we have tried to work our budget,” he said. “We worked to try to change the operational model of the Fire Department and partnered with the Ohio Highway Patrol to do accident investigations.”

Creative budgeting can only do so much, however. The state-legislated curtailing of traffic ticket cameras — requiring an officer to be present for cameras to issue tickets — erased hundreds of thousands of dollars in annual revenue for Middletown.

”It was an encroachment on our home rule,” Mulligan said. He argues that the ticket cameras are a more efficient way to enforce traffic rules “than to put a high-paid public servant out there to watch traffic go by.”

The lost revenue comes as cities are crawling back from the Great Recession. Dayton is saddled with 13,000 vacant or abandoned homes after tearing down 2,000 since 2011.

Income tax revenue is up in Dayton but doesn’t even the scale. Through the end of May, the city of Dayton collected $46.4 million in income taxes — up $3.1 million from the same period in 2014. The city also is receiving casino tax revenue — $807,000 for the first quarter of this year.

But cities are where poverty concentrates, and the costs of dealing with those problems continue to escalate. The Ohio Development Services Agency estimates 1.8 million Ohioans live in poverty — largely in cities. In cities and suburbs, 27.8 percent of residents are poor in contrast to 11 percent in rural areas. Poverty in the largest cities is deeper now than in 1999.

The City of Dayton’s Office of Management & Budget calculates the state’s biennial budget redirects $18 million from Ohio cities in 2015 and $23 million in 2016. Meanwhile, townships and villages gain $12 million in each of those years, according to the city’s calculations.

“State lawmakers continue their four-year assault on local governments in the budget bill for fiscal years 2016-17,even as the slow recovery continues to be a drag on local revenue collections,” the left-leaning Policy Matters Ohio said in a report last month. “At the same time, lawmakers prepare an income tax cut of more than $1 billion that primarily flows to the richest Ohioans.”

Shelley Dickstein, Dayton’s Assistant City Manager for Strategic Development, questioned the logic of cutting revenue to cities.

“When you look at the economic wealth generated in the densest areas of the state and then making cuts to them to redistribute to townships, I don’t understand what the strategy is,” she said.

Some blame under-representation of urban legislators in Columbus, and over-representation of rural lawmakers — a function of how legislative districts are drawn.

In his speech announcing his presidential campaign Tuesday, Kasich noted that the state’s rainy day fund was 89 cents when he began his term as governor. It sits at $2 billion now.

But Montgomery County Auditor Karl Keith said the increased cushion has come at a cost.

“The state is looking for ways to balance their budget and reduce their income taxes and balancing a bit by increasing sales taxes,” he said. “But the other way they balance their budget is by eliminating support for cities.”

Butler County Commissioner Don Dixon says he understands some budget cuts were necessary, but he believes slashing local government funds while feeding the state’s rainy day fund is unfair.

“He (Kasich) needs to stop and look where local government is and leave some of the local tax dollars here in Butler County so we can fund the projects we need to fund,” Dixon said.

Lone wolf

At least one local official says he’s OK with the cuts. Warren County has seen a 49 percent drop in local government funds since 2010, bringing the total down to $1.5 million last year. Acknowledging he might be a lone wolf, Warren County Commissioner Dave Young said the cuts put more responsibility on local governments to manage their budgets.

In fact, said Young, he wishes the state would have dug deeper into the state budget.

“The only thing I wish the state would have done was not just targeted a couple areas for cuts,” he said. “I wish they would have cut the entire state budget more.”

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