City sees tax increase as only way to fix Springfield streets

But Clark County business leaders believe the city should fix roads without raising taxes.

Springfield residents will vote Nov. 4 on whether or not to raise their income taxes for five years to generate about $3.75 million per year to pay for road repairs. The municipal income tax would increase from 2 to 2.25 percent.

Early voting for the general election is scheduled to begin Sept. 30.

City leaders have tried hard to not ask residents for a tax increase for anything unless it “absolutely had to,” Mayor Warren Copeland said, and it’s up to voters to decide if they want the streets fixed.

“It’s really just to me a sad reality that we cannot see any way that makes financial sense that we’re going to be able to fix neighborhood streets in Springfield without an increase in revenue,” Copeland said.

While business leaders understand the need for good streets and agree that it must be dealt with soon, the city’s tax increase plan falls short of addressing the current and future problem, said Mike McDorman, president of the Greater Springfield Chamber of Commerce.

Business leaders want more time to collaborate with the city to find a better way to fix streets without raising taxes, McDorman said.

“To simply place a Band-Aid on a gaping wound would cost the taxpayers of Springfield more money that they do not have and would not sufficiently address the problem,” he said.

‘Perfect storm’

The city maintained its streets at a reasonable level for years, Springfield City Manager Jim Bodenmiller said, but the fluctuating temperatures earlier this year deteriorated roads quickly.

“It just wreaked havoc on the streets,” Bodenmiller said.

And it costs more to fix them than ever before, he said, while the city is collecting less money in overall revenue than it did seven years ago.

“It’s kind of a perfect storm of problems,” Bodenmiller said. “It’s not going to get better without additional revenue.”

This year the city spent about $928,000 on its street paving program, but that “doesn’t make a dent in the need,” he said. The city has about 750 lane miles of pavement.

There’s no fat to trim from the general fund budget, Bodenmiller said.

“There is not money within our current budget to fix the streets,” he said. “That’s why we’re going to the people.”

Funding issues

The current 2 percent income tax costs a person making $30,000 annually about $600 a year. A 2.25 income tax rate would cost a person making $30,000 annually about $675 a year.

The city hasn’t asked voters for new tax money since the special police levy passed in 1990, which pays for about 24 police officers. It was renewed permanently in 2001.

Springfield voters recently approved a 15-year renewal of a half-percent income tax that will keep the city’s rate at 2 percent until 2030. The issue passed with 60 percent of the vote.

In 2007, the city’s general fund revenues were about $39.8 million. This year, the city’s general fund revenues are about $36.5 million.

“We’re operating on $3.3 million less today than we were in 2007,” Bodenmiller said.

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.

While the city’s income tax has increased in recent years, state cuts to the local government funds and the phasing out of the estate tax have resulted in about $3 million less for the city annually.

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 currently spends about 71 percent of its general fund on public safety, including police, fire, emergency medical services, dispatching and the municipal court.

The city splits its income tax revenue, sending 90 percent to the general fund to pay for most of its services. The remainder goes toward large capital expenses, such as vehicle purchases, building repairs and road projects.

Will it end?

Copeland and Bodenmiller presented the city’s plan to the chamber board earlier this month. It calls for about 30 to 40 percent of streets to be repaired over the next five years, meaning the tax increase will likely need to be renewed to fix the remaining streets.

The city’s plan isn’t sustainable, said McDorman of the chamber, and doesn’t include a maintenance plan for other streets to be repaired during this time.

“It will not end in five years,” he said.

The increased tax rate will drive further population declines and not fully address the issue, McDorman said. Business leaders want to work with the city to develop a better plan for fixing streets within its current resources.

“We all know there’s an issue with the roads, but the concern was: Is this going to get us where we need to be?” said John Landess, chairman of the chamber board and executive director of the Turner Foundation. “Do we fully understand what it may take relative to what we may be giving up on the other side by increasing taxes? Let’s take all these things into consideration.”

The area is making great strides in building the landscape to bring people back to Springfield and Clark County, McDorman said, particularly with new schools, health care facilities and recreational amenities.

The increased income tax would be a red flag to keep people from coming to Springfield, he said.

“It speaks volumes to the rest of the world, whether it is a business or someone looking to locate their family,” McDorman said.

The city is willing to work with anyone on budget issues, Bodenmiller said, but believes the best way the chamber could assist the city is working with the state legislature to have local government funds returned to Ohio’s municipalities.

Development issue?

Of the 614 municipalities in Ohio that had an income tax in 2012, 39 have an income tax that’s more than 2 percent. Springfield is among 113 municipalities with an income tax at 2 percent.

Of the 25 largest cities in Ohio, 10 have an income tax rate higher than 2 percent, including Columbus (2.5%) and Dayton (2.25%). Only seven cities of the top 25 have an income tax rate below 2 percent.

While taxes are part of the site selection discussion, it’s not one of the top five factors for businesses deciding where to locate, said Tom Franzen, assistant city manager and director of economic development.

Businesses are also looking for welcoming cities with infrastructure and amenities. Springfield’s location and proximity to Interstates 70 and 75 are key, Copeland said.

“We acknowledge it’s an impact on businesses, but from an economic development perspective, it may not be as big a deal as it’s being made out to be,” Franzen said.

Springfield City Commissioner Dan Martin voted against placing the issue on the ballot. The streets need to be fixed, he said, but the additional tax might repress the job creation the city has seen in the past few years.

“It appears to be a pretty consistent trend that higher taxes deter economic growth,” Martin said. “As important as it is to fix streets, I don’t want to do that at the expense of lost job opportunities and discourage companies from doing business here.”

Martin wants to build up the city’s permanent improvement fund over time, while also addressing the most serious street problems. He’s not opposed to borrowing money to bridge the gap.

The city will see some of its debt paid off in the coming years. In 2009, the city owed about $17 million from previous projects, including building City Hall. A balance of about $8.4 million remains.

Most of that balance should be paid off by 2016, except for an Ohio Department of Development loan used as part of the downtown hospital project, according to the city finance department.

The money that is no longer going to pay off debt could be used to build up the capital budget, Martin said.

An increased income tax can have both positive and negative effects, depending on the rates of surrounding communities and what the taxes will provide to the community, said Robert T. Greenbaum, associate professor of public policy and management at Ohio State University.

“The question is: What happens if you don’t fix those streets and how does that affect business location decisions?” he said.

Businesses and individuals wanting to relocate look at more than just income taxes, Greenbaum said, including property taxes, the amount of services and available infrastructure.

“It’s dangerous to look at one tax and make conclusions on that one tax when there might be a pretty large differential with property taxes,” Greenbaum said.

The increased income tax wouldn’t affect A&E Powder Coating, said co-owner Ed Leventhal, who supports the tax.

“I assume with all the loss of income from state cuts, it looks like the only way to get the streets repaired,” Leventhal said.

Residents view

The city needs to do something about the condition of the streets, said Danny Davis, 1526 Linden Ave. He lives near a stretch of Fremont Avenue that was paved earlier this summer.

However, the road in front of his house is full of potholes, Davis said. He plans on supporting the tax because the street is in dire need of repairs.

“(Linden) is all torn up, especially during the winter,” Davis said. “They need to do something.”

The increased revenue won’t fix the problem, said Delmar Porter, 1502 Catherine St., who is opposed to the tax. After months of complaining, the city finally patched potholes on that street.

“It’s not going to help,” Porter said of the proposed income tax increase.

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