City of Lyndhurst, Ohio Finance Committee
Agendas & Minutes
October 9, 2012: Finance Committee
The Finance Committee will meet on Tuesday, October 9, 2012 at 6:15 p.m. to further discuss the Tax Credit/Tax Rate issue.
Patrick A. Ward, Chairman
October 9, 2012: Finance Committee
The Finance Committee met Tuesday, October 9, 2012 at 6:15 p.m. Present were Council members Frey, Gambatese, LoPresti, Packard, Schlessel and Ward. Also present were, Mayor Cicero and Finance Director Kovalchik. The purpose of the meeting was to continue discussion on the topic of the Income Tax Credit/Income Tax Rate Issue.
Chairman Ward opened the discussion by enumerating the many changes to programs and operations this Council and the Administration have enacted, especially since 2007. These include the Early Retirement Incentive Program, Automated Recycling, Automated Trash Collection, Replacing Brainard Pool with a Splash Park, EMS and MVA Billings, SELREC, Animal Warden outsourcing, School Crossing and Park Guard changes, Boards and Commissions stipend changes, Tree Program Assessment, grants, RITA Subpoena Program, Rental and Foreclosure registrations and more. We also have received help from our employees with (2) year contract extensions and our yearly medical benefits review which has save the City greatly. All of these initiatives have cut over $1.2 million in yearly expense from our budgets. Without this hard work, on everyone's part, we would have been forced to visit the Income Tax topic several years ago.
Chairman Ward then asked Finance Director Kovalchik to explain the "Hole" the City is facing due specifically to cuts the State has made. Mrs. Kovalchik explained that the loss of Estate Tax revenue, which will not be assessed after December 31st, along with lower Local Government Assistance, which is impacting our schools as well, when coupled with lower property values will impact the City to the tune of $1.67 million per year. She stated that by 2015 the City will be looking at a negative carry-forward balance of over $1.6 million. She said that currently Income Tax is showing well ahead of last year but one large payer has filed an estimate from which a sizeable refund may end up being due once returns are filed. In any event Income Tax revenue continues to be healthy. She has also figured in added personnel at the Cleveland Clinic Lyndhurst Campus as per the Clinic's representations.
Mr. Ward sated the options to fill the "hole" are layoffs, further program cuts or eliminations, increasing our Income Tax Rate or adjusting the Income Tax Credit. Mr. Frey had asked, at a previous meeting, if it would be possible to illustrate the loss of revenue against our budget. Mrs. Kovalchik prepared an illustration, for discussion purposes only, showing the impact of $1.67 million dollars in cuts spread evenly across our departments. The changes to essential services alone were sobering to see on paper. Mr. Gambatese had asked if Mrs. Kovalchik could provide a chart of the various Income tax scenarios that had been talked about. All members were provided a chart illustrating the impact of eliminating the Tax Credit which was distributed for review. Mr. Gambatese stated that there was no question that additional money is needed and the chart provided is very helpful indicating the options we have. Members asked numerous questions about the different tax rate/credit combinations.
Mr. Ward suggested one approach would be to reduce the credit to 25% for now and put a rate increase question on the ballot next year. Mr. Schlessel indicated it would not be wise to approach the matter piecemeal and revisiting it over and over again. Mr. Gambatese indicated he would be in favor of an approach that shares the burden between residents and non-residents who work in the City. Mr. Packard and Mr. LoPresti were in favor of getting additional resident input.
Mr. Ward opened the discussion to the residents present. Mr. Richard Clark questioned the impact that potential cuts to the safety forces would have upon his homeowner's insurance rates. Mr. Ward stated that the City is rated on numerous criteria including personnel, equipment and so on. Mrs. Kovalchik indicated that it was a very good question and she would see if there might be any data available to provide a more definitive answer. Dr. Salerno, a resident and business owner indicated he would prefer Council opt for an approach that balances the burden over residents and non-residents as that would seem fair. He said that, since many Lyndhurst businesses are small operations that are attracted to the location and the traffic along our main arteries they would not be looking at the City's tax rate as a primary deciding factor if looking to locate, stay or expand in Lyndhurst. Mr. Dennis Kane indicated that he learned a lot from the meeting and that Council needed to be sure to clearly communicate who will be impacted and how they will be impacted by any decision that is made.
Mr. Ward stated that he will ask the Director of Law to draw up legislation rescinding the tax credit for the Committee to review prior to the next Council meeting. The Committee can review the legislation at its next meeting, 7pm on October 15, and decide whether to recommend Council's consideration or suggest an alternate approach. Mrs. Kovalchik will prepare additional illustrations on two scenarios; rescinding the full credit now, placing a tax increase question on a May ballot to 2% with a .50% credit or a combination of the two.
With no further business to discuss the meeting adjourned at 7:27 pm.
Patrick A. Ward