City Uses Cash Reserves to Cover Income Tax Declines

City income tax collections have either stayed the same or fallen the past few years, but you probably didn’t notice.

Mayfield Heights hasn’t cut any personnel or city services because officials tapped into general fund reserves to cover the lost income tax revenue.

“In the short term, we didn’t have to do furloughs or reduction in workforce because of the prudent reserves we maintained to anticipate or to help absorb the impact of any decline in property tax or, in this case, income tax collections,” Mayfield Finance Director Robert Tribby said. “We were able to have those reserves in place so it did not impact our city. We were fortunate we didn’t have to do that or reduce services.”

Historically, the city has kept general fund reserves between $6 million and $7 million. Tribby expects reserves will decrease further as the city makes up for state cutbacks to local governments.

“It’s really a little early to say what the total impact is going to be,” Tribby said. “It’s just something that we’re aware of and we’ll have to watch how our overall revenues come in the next year or two and our projections to see where our total revenues are going to be and vis a vis our reserves that we were able to maintain.”

Tribby said the city will also keep an eye on its expenditures, including health care costs.

“That’s a significant part of our budget and so we’ll be watching that to see whether the costs are going up significantly,” he said. “They always have, so I don’t see any changes there.”

For 2012, Tribby projects 60 percent of income tax revenue will go toward the $18.9 million general operating fund.

Total income tax revenue for the past four years were:

• $11.8 million in 2008
• $10.4 million in 2009
• $10.7 million in 2010
• $12.1 million in 2011

As of July, the city collected $7.5 million of a projected $11.25 million for the year.

Collections increased 12.5 percent in 2011 from 2010, much more than expected. But after investigation, city officials found much of that uptick came from employees collecting stock options — a one-time tax collection.

“It’s not a negative thing,” Tribby said, adding he expects the city will continue to hold steady with this year’s collections. “We don’t anticipate any significant drops from last year. There may be a slight decrease from the one-time plus last year but there shouldn’t be a major impact on our collections this year.”

Mayor Gregory Costabile said he knows the spike was an anomaly, but he’ll take it.

More than 80 percent of the city’s income taxes come from employee paycheck withholdings, so Costabile said it’s important the city continues to try to find ways to grow the community and income tax base.

“Basically our economic development initiatives have helped us weather the storm and continue to provide the services our residents have become accustomed to,” Costabile said, who is thankful the Community Unity Days Festival is as vibrant as in years past. “By continuing to work in that area, we’ve been fortunate with major companies either expanding within the city, choosing to stay here and expand or even having additional business communities come in to our corporate park.”

Officials are leveraging a 1 percent income tax rate and corporate park as an attraction for businesses — two recent companies told Costabile what they enjoyed about the area is the campus-like atmosphere, ease of access for employees and overall feeling of safety. To capitalize on that, officials have upgraded the city’s website to make sure businesses can see what Mayfield Heights can offer.

One way the city is working to do that is by improving the city’s retail corridor. The city has widened Cedar and Mayfield roads to improve access and will create a strategic plan to attract developers and improve its retail corridor.  

“What I see is people very anxious to get in Mayfield Road and Som Center Road,” Costabile said. “We’re tearing down old buildings and building new ones. I really think it’s vibrant, and I think when we’re done with our strategic plan, it will only further invite others to come out so we’re excited about that.”

The city is also trying to be smarter with less revenue and secure grants to make up the difference. The city received a $430,000 energy conservation grant to improve efficiency and reduce utility bills for the city.

“These are things the city has to continue to do,” Costabile said. “You have to continue to reinvent yourself and not just sit back and say ‘OK, that was a good year,’ and expect that to happen every year. When you continue to reinvent yourself and find new ways to be attractive, it allows you to hopefully have a successful future.”

And the city’s headed in the right direction, no doubt about it, Costabile said.

“We will continue to monitor (income tax collection) reports,” Costabile said. “We can’t get too excited or disappointed. We have to wait it out.”

Editor’s Note: In this series, Patch gauges the recovery of 18 Ohio communities based on income tax receipts since the Great Recession. Read about