“Counties are watching state revenue figures closely as county piggyback sales taxes follow similar trends as state sales tax collections, although there will be variation between counties,” a report from the County Commissioners Association of Ohio said.
“The sales tax is the largest revenue source for many counties. Weakening sales tax receipts will directly impact counties’ ability to provide critical county services.
The projected $44 million in Butler County sales tax revenue will continue to decrease the longer the pandemic lingers. Sales tax accounts for 40 percent of the county general fund revenues. The county commissioners passed a structurally balanced $109.4 million general fund budget and $394 million revenue total for all funds this year.
County Administrator Judi Boyko has noted other revenue sources are also vulnerable, such as investment interest, hotel tax, property tax, building permit fees, recorder/transfer fees to name a few.
“Presently, preliminary modeling demonstrates a double-digit million dollar decline in 2020 revenues,” Boyko said.
She said she and the county’s budget analyst are “trying not to play Chicken Little, that the sky is falling, but with a substantial service industry economy with reduced sales and increased unemployment, the decline is exacerbated.”
At budget time, the county’s revenue carryover was projected to be about $62 million, including $10 million in the budget stabilization fund. Commissioner Don Dixon said he doesn’t see a need to take any drastic action immediately.
“We all know where it’s headed, at the end of the day it’s, my guess is revenues will be down 15 to 20 percent at the end of the year,” Dixon said. “So that requires something, we just have to wait and see. It’s so strange, it’s not really a monetary slowdown, it’s a health problem slowdown, the key is how quickly they can get everybody tested and back to work and see where the economy really is.”
The main source of income for cities is income tax. The state financial report showed state income tax dollars were 10.4 percent lower in March than last year.
Hamilton collected almost $29.4 million in earnings taxes last year, which represents about 53 percent of the general fund revenue. Hamilton City Manager Joshua Smith said the city has sliced $9.25 million worth of expenses across all funds for this year. The largest savings, $7 million, came by delaying several capital improvement projects for its utilities. A little over $1.5 million came out of the infrastructure operations and maintenance division by not filling vacancies and other cuts.
Smith said $579,000 came out of the general fund by eliminating non-union raises, not replacing employees who have retired or resigned and other cuts.
“City council should be commended for strengthening the city’s balance sheet in the past decade,” Smith wrote in a report to council last week. “If this pandemic would have happened in March 2010 versus March 2020, we would be rapidly heading towards furloughs and layoffs.”
Middletown Interim City Manager Susan Cohen said income taxes totalled $26.3 million last year, and the council budgeted $24.1 million for this year before the pandemic struck. Earnings taxes make up about 59 percent of the general fund budget and 26 percent of all revenues.
“Middletown has taken steps to de-appropriate monies from this year’s budget to help build our reserve. We have slowed down hiring, holding off on seasonal hiring and only making new employment offers when absolutely operationally necessary,” she said. “We continue to evaluate the situation and revise budgets as necessary.”
Fairfield collected $32 million in income taxes last year, including $25.8 million in the general fund, which represents 78 percent of the revenues for that main operating fund. About $6 million is split between capital and street improvements.
Fairfield City Manager Mark Wendling said income tax receipts for February and March were 8.78 and 9.4 percent above 2019 numbers respectively.
“There will be a significant decline in the second quarter, but we do not yet know how much to expect,” Wendling said. “In the meantime the salaries and wages of all unclassified, non-contract staff members have been frozen; we have instituted a hiring freeze for full time non- emergency positions; travel has been restricted for at least the next several months, and budgets are under review.”
Oxford is expecting a $1.2 million revenue drop, according to City Manager Doug Elliott, including $972,454 in income tax revenue plus a delay of $871,250 due to the July 15 tax filing extension the state granted.
“With the projected loss in revenues, the city will need to reduce spending by 10 percent in order to bring spending in line with revenues,” Elliott said. “The initial steps taken to ensure the continuation of essential services include freezing all hiring except public safety personnel, suspending all out-of-state travel, and reducing budgeted capital expenditures.”
Monroe City Manager Bill Brock said travel and training has already been cut and he gave his department heads a week to development budget cutting scenarios for 10 and 20 percent cuts. He estimated at those levels the city could save $2.8 to $5 million.
Townships do not generally collect much more than property taxes, but income taxes are allowed in Joint Economic Development Districts. Last year, Fairfield, Liberty and West Chester townships collected $700,000, $2.6 million and $1.8 million respectively in JEDD income taxes.
Fairfield Twp. Administrator Julie Vonderhaar said the township could lose $500,000 to $1 million due to the pandemic.
“We operate on a very lean staff. Our cash positions in the General Fund, JEDD, and TIF are stable,” she said. “A primary source used for our operations is the TIF which should not be impacted and replenishes each year. For our two new buildings, the board recently took debt which preserves our cash position. In addition I recommended raises to non-union employees wait until we have a handle on the future.”
West Chester Twp. Finance Director Ken Keim said the state’s largest township is in good financial shape now but they will remain “vigilant”.
“Years of sound financial management by our trustees place us in a position that we can weather most circumstances,” Keim said. “We may not see the full economic impact from this particular crisis for several years, and are looking at short-term impacts over a range of possibilities while thinking about the risks.”
The townships rely primarily on property tax revenues and Butler County Auditor Roger Reynolds said there is cause for concern in that regard. When the pandemic hit his office was finalizing a countywide property revaluation. He is awaiting word from the state auditor on how to proceed given the crisis. Some property values could rise 15 to 20 percent unless he can adjust the reappraisal.
He said this is the exact situation he faced when he took office in 2008 before the Great Recession. He then had to increase some property values, but was able to adjust them back down in 2009. Delinquent tax payments for mid-year collections are another matter.
“Roughly 40 percent of residential property owners escrow their property taxes which mean those specific taxes have already been collected and we don’t expect a problem with roughly 40 percent,” Reynolds said. “That leaves roughly 60 percent susceptible to delinquency, that’s currently the big unknown.”
Gov. Mike DeWine announced Thursday he will slowly allow the state’s economy to come back to life beginning May 1. Liberty Twp. Trustee Steve Schramm said it might not be as simple as relaxing rules.
“The big issue for us is how much longer this lasts, there’s certainly going to be some pent up demand for purchasing so I would like to think the retail sector would jump back to some kind of normalcy pretty quickly,” Schramm said. “But the restaurant and bar businesses are going to be one of those beauty is in the eye of the beholder. I think they’re going to open up but it’s going to be an issue of how quickly can you convince people that it’s safe to come back.”
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