Cities, townships wait for hit, Thank You John Kasich and GOP

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Cities, townships wait for hit
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Officials look to levies as state proposes cuts to local-government fund, end of estate tax
Sunday, March 27, 2011  03:15 AM
By Dean Narciso

THE COLUMBUS DISPATCH
Some central Ohio communities are starting to plan for a future without a large chunk of their revenue after state proposals to cut the local-government fund, eliminate the estate tax and not make up for federal stimulus money.

Gov. John Kasich's budget plan cuts funding to municipalities by about 25 percent in the first year and an additional 25 percent in the second. The state legislature has been debating eliminating the estate tax.

Kasich has urged cities to combine services and shave costs to cope with the cuts - while not raising local taxes - but some officials in some communities say they want to keep all their options on the table.

"Hypothetically, if they both go away, what are the ways to restore our revenues?" asked Wade Steen, an Upper Arlington councilman.

He requested a report from the city's finance department outlining worst-case scenarios.

"If you're just sitting on your hands and waiting for things to happen, you're not effectively managing things," Steen said.

Bexley faces losing at least a quarter of its revenue if both state funding and inheritance taxes are eliminated.

"We're looking at a major hit," said Mayor John Brennan, who anticipates further cuts or elimination of local funding in Kasich's next biennial budget. "It's kind of a death knell for us."

Bexley's income tax receipts are expected to rise about 2percent this year, but that wouldn't make up for the cut to the local-government fund in the next two years.

"We're going to have to look at some sort of a tax hike by as early as this fall," Brennan said.

The wild card is the estate tax. Both Bexley and Upper Arlington rely on it. Upper Arlington counts on it for more than $3million annually.

An Upper Arlington study showed that raising its income tax rate from 2 percent to 2.5 percent would raise about $3.5 million a year, enough to cover the loss of all state assistance, as well as the estate tax.

An increase of 3.5 mills in property tax would do the same, the study showed.

While the study makes no recommendations, some residents won't even consider tax hikes.

"It's just unconscionable," said resident John Ross. "The fast, easy approach in this economy isn't going to fly.

"You just can't raise people's taxes when people are out of work, properties are being foreclosed on and houses are for sale. You simply can't take that approach."

Steen, who owns an accounting firm catering to government and nonprofits, cautions his clients and other governments: "If you're waiting around for someone else to provide your solution ... you're in for a world of hurt."

Bexley, meanwhile, receives more than $1.5 million a year in estate taxes, said Brennan, who bristled at the governor's statement that cities can get by without raising local taxes.

"That's fine for him to say that. But he doesn't live in Bexley. He's not in my shoes. It's a quality-of-services issue to us."

The city of Delaware also discussed contingencies last week. The City Council agreed to let its finance committee look into options, said Lee Yoakum, city spokesman.

"Let's not wait for the full impact of 2013," he said, referring to the possibility that all state funding for local government could be eliminated. Nebraska passed a law this month doing that.

Local townships might stand to lose even more than cities, said Matthew DeTemple, executive director of the Ohio Township Association.

"My sense is that most townships have been trying to plan for this. We figured we would have to do our share ... but it seems like we are being asked to do a little more than our share."

Norwich Township Trustee Larry Earman is frustrated by the governor's attitude toward local government.

"Maybe we ought to have one of his financial gurus come out and look at our financial position and tell us where to cut. I'm willing to be a test case. Bring them out."

The township, which spends 85percent of its budget on payroll and a fire department, is poised to go to the ballot asking for a property tax increase as early as next spring, Earman said.

"I sympathize with his problem and his job," Earman said of Kasich. "But it's easy to say, 'We're going to cut your taxes and I don't want to you to raise taxes.'"

Local officials are "attentive," but not beholden to Ohio's chief executive, Steen said.

"Both candidates for governor were talking about the budget crisis and how it would affect local governments, but neither had any specifics."

DeTemple notes that townships can't enact sales or income taxes. They rely solely on property taxes and state contributions to make ends meet.

And Kasich's suggestion that there are savings to be had from proposed changes in collective-bargaining rules for public employees is little solace to most townships, DeTemple said. Fewer than 100 of the state's 1,300 townships are big enough to engage in collective bargaining, he said.

"We're concerned about where this is headed," DeTemple added.