The city of Springfield will ask voters to renew a half-percent income tax on the May 6 ballot that generates about $7.5 million per year.
If denied, city leaders say it could lead to a reduction in services, such as snow plowing and street lighting.
“It’s the biggest issue we face,” Mayor Warren Copeland said. “If we lose a quarter of the income tax, we really wouldn’t be able to run city government.”
Springfield has a 2 percent total income tax rate, including a permanent 1.5 percent tax. The remaining 0.5 percent is renewable.
The city isn’t seeking new tax dollars, City Manager Jim Bodenmiller said, rather a continuation of the current half-percent tax.
“The city of Springfield provides services to you every single day that a lot of times you don’t think about, like driving down the road and you go through street lights that have to function properly,” he said. “There’s a lot of value that you get for your local tax dollars.”
Opponents of the renewal, though, believe a decrease in taxes would attract more people and businesses to the city.
“If we want to get jobs and more people to the community, we have to be more tax friendly,” said Dan Harkins, a local attorney who ran for city commission last November and lost. He made reducing local taxes a campaign platform. “I think the city and county need to collaborate much more and possibly merge.”
The city collected about $29.7 million in income taxes for 2013, which makes up about 74 percent of the city’s general fund revenues, according to public documents. The half-percent income tax up for renewal generates about $7.5 million annually.
About 71 percent of the general fund is spent on public safety, including police, fire, emergency medical services, dispatching and the municipal court.
If the renewal fails, Bodenmiller said the city would likely try again in November.
Adult residents are only taxed if they’re working — the income tax doesn’t apply to retirees, pensions, investment earnings or individuals younger than 18.
The tax also applies to the net profits of businesses, meaning corporations are taxed on profits after deductions.
The half-percent tax costs a person making $30,000 per year about $150 annually, according to city Finance Director Mark Beckdahl.
Currently Springfield has a total of 42,280 taxpayer accounts, according to the city’s finance department. That includes more than 33,920 individual, 3,600 business and 4,755 withholding accounts.
There are more withholding accounts because certain entities, such as non-profits, churches and banks, withhold taxes but don’t file a return, according to Beckdahl. There are also businesses outside of Springfield that set up withholding accounts for Springfield residents.
The city splits its income tax revenue, sending 90 percent to the general fund to pay for most of its services. The remainder goes to the permanent improvement fund for large capital expenses, such as vehicle purchases, building repairs and road projects.
The city’s general fund is typically about $37 million per year, Bodenmiller said.
If the tax wasn’t renewed, the city would have about $29.75 million in its general fund.
The city currently spends $26.2 million on safety services, such as police, fire, dispatch and courts.
If the tax expired and the city continued its current budgets on public safety, it would spend about $3.5 million on remaining services that range from snow plowing to zoning to building regulations. That’s less than a third of what the city currently spend on those services.
Copeland said the vast majority of the city’s safety expenditures cannot be significantly reduced due to the city’s charter, which includes minimum staffing levels for both police and fire, as well as financing the municipal court and the 9-1-1 system.
“That’s two-thirds to three-fourths of the budget,” Copeland said. “The rest would simply disappear if we don’t pass this. It’s critical that it pass.”
The police responded to 61,000 calls for service last year, while the fire division responded to 16,000 calls for fire and emergency medical services. The city Service Department also maintained 720 lane miles of pavement.
“We provide a quality service,” Bodenmiller said. “We’ve not asked for any increases in the past. I’m hopeful the public will be supportive of us.”
Harkins believes the tax rate will keep the city from becoming more competitive economically. The communities with the most growth, he said, have either lowered or eliminated the tax rate and provide 100 percent credit to commuters for taxes they pay in other municipalities.
The city and county governments should merge to eliminate redundancies, Harkins said.
“You would probably have much more efficient government at less cost,” he said.
State cuts to local government funds and the elimination of the estate tax and others have meant about $3 million to $3.5 million in reduced revenues annually for the city, Bodenmiller said.
Last year, the city ran an operating deficit of $140,000. It plans to dip into its reserve funds to cover a projected $1.3 million shortfall this year.
The city has eliminated about 135 jobs over the past seven years, mostly through attrition, and cut back on certain services, such as paving neighborhood streets.
“There’s not much fat there left,” Copeland said.
A reduction in administrative services, like the finance department or engineering, Copeland said, could hamper the city’s ability to function properly.
“Somebody has to pay the bills and somebody’s got to keep the records of how those bills are paid,” he said. “While people may think that’s a bureaucracy, it’s an essential part of city government.”
By the Numbers
$7.5 million: Revenue generated for the city by the 0.5 percent income tax that’s renewable
2 percent: The city’s currently income tax rate, including a permanent 1.5 percent
$600: Estimated cost of the city’s 2 percent income tax rate for a person making $30,000 per year.
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