Audit: Springfield needs income tax hike, must study consolidation

10:29 a.m. Friday, Oct. 14, 2016 Politics

The city of Springfield can’t cut enough expenses to balance its budget, an independent review of its finances says, but a tax increase also won’t be enough to put Springfield on solid financial footing long-term.

A performance audit paid for by the city and Chamber of Greater Springfield recommended voters approve an income tax increase on the Nov. 8 ballot to remedy its financial situation in the short-term. The $125,000 study of the city’s general fund was released this week.

“Given the urgency of the situation and the lack of options that city officials could unilaterally adopt immediately to remedy it, we recommend that the city electorate approve the income tax increase on the November ballot,” the report says.

>>RELATED: $125K study will analyze Springfield’s finances

No other revenue options currently available will generate as much as an income tax increase and making cuts won’t reduce expenses enough to balance the budget, the report says.

“The income tax is necessary to address the immediate projected deficits and the city needs to aggressively pursue other initiatives to ensure city government achieves long-term financial structural balance,” the report says.

The report will point the community in the direction it needs to go, Chamber of Greater Springfield President and CEO Mike McDorman said. The report shows the city finds itself in a really tough situation, he said.

“Not only do they need additional tax revenue, but they’re going to need to make some tough decisions in regards to their operation,” he said.

The chamber won’t take a formal stance on the income tax increase, McDorman said. It still has concerns about the proposed increase, he said, including the effect it may have on attracting new jobs to Springfield and retaining existing companies.

“If you raise Springfield’s municipal income tax rate, it would become one of the highest in the state of Ohio with a lower level of service being offered today,” McDorman said. “Any additional income tax burden will make it even more difficult to attract people and families to live in Springfield.”

Of the 20-most populated cities in Ohio, 10 currently have a higher income tax rate than Springfield’s 2 percent rate.

The independent audit was completed by Philadelphia-based Public Financial Management. The firm has completed similar studies for local governments throughout Ohio, including the city of Hamilton and Hamilton County.

Over the past five years, the city’s finances have gone from modest surplus to a large deficit, Public Financial Management Director Gordon Mann said. The city faces a $930,000 deficit this year, which will continue to grow if not addressed, he said.

But increasing taxes isn’t a long-term solution, Mann said, and the city must diversify its revenue sources and reduce expenditures.

“That’s the key,” he said. “It has to be a bridge to something else.”

Several recommendations in the report include combining the 9-1-1 dispatch center with Clark County, eliminating subsidies to Reid Park Golf Course and evaluating outsourcing services such as code enforcement, facility cleaning and vehicle maintenance. The report also recommends a study of the Clark County Municipal Court staffing and discussing consolidation between the municipal and county clerks offices.

“We’re willing to look at all of these areas and to make absolutely certain we’re going to spend the tax dollars appropriately,” Springfield City Manager Jim Bodenmiller said.

The five-year increase would raise the local income tax rate from 2 to 2.4 percent if approved and would generate an additional $6.7 million annually. It would cost a worker who makes $30,000 a year an additional $9.75 per month.

The report didn’t find any smoking gun or areas of credible inefficiency, Bodenmiller said.

“It indicates we’re doing a good job in managing the funds that we had,” he said. “We’re in this condition because a $5 million-plus hole created by cuts from the state, property tax delinquencies and a lack of EMS revenues to cover our costs. Those were all areas outside of the city’s ability to control them.”

Springfield and its employees have done a good job of controlling spending per person, including four years without wage increases and changing its health care plans to save money.

The majority of spending in city government is on people, which is the case across the country, Mann said. They’ve also done a good job on not filling positions and combining roles through attrition, he said.

“The city did not spend itself into a deficit,” Mann said.

Springfield’s next step is to analyze what city government does and how it’s done, Mann said.

“Those are difficult conversations, but if Springfield’s going to get into balance and be stable in the long-term, those are the conversations that need to start now,” Mann said. “The changes will take time. You won’t flip a switch and make the expenditures changes that need to be made. If you wait five years, it’s going to be too late.”