November 28, 2002

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Provided Village service for more than 30 years—
Dayton to stop collecting taxes

The Village must find a new way to collect income tax revenue now that the City of Dayton has announced that it will no longer provide tax collection services to other municipalities.

The decision by Dayton, which has collected income taxes for the Village for more than 30 years, leaves the Village scrambling to find an alternative solution in less than three months.

Nearly two weeks ago, the Village learned of Dayton’s decision. Village Manager Rob Hillard, who said he did not anticipate this situation, informed Village Council of the news at its meeting Nov. 18. Council president Tony Arnett called the task of finding a new way to collect income taxes the Village’s “No. 1 priority.”

Though the Village levies a 1 percent income tax on people who work in Yellow Springs, and in some cases, who live here, for years it has paid the City of Dayton to collect the tax. The Village pays Dayton a 3.33 percent collection fee for the service. In 2000, the Village paid $54,000.

Dayton will discontinue its collection service on Feb. 14.

Dayton officials decided to stop the service because of budgetary concerns, which have affected the city’s staffing levels, said Michael Voelkl, the city’s manager of revenue and taxation. “We do not have the staff anymore to meet” Dayton’s agreement with the Village and other communities, he said.

Recently, Dayton reorganized its tax and finance departments, making the tax department about seven positions smaller than it was about two years ago, Voelkl said.

Dayton also collects taxes for Brookville, Cedarville, Englewood, Phillipsburg and West Milton.

In its 2002 Village budget, the Village expected to receive $1.4 million in income taxes, which is used to fund activities in the Village general fund. Income taxes account for 64 percent of the fund’s revenue. The general fund includes the Village administrative offices, Council, the mayor’s office, the parks department, Gaunt Park Pool and the streets department.

At this time, the Village is considering three options:

• Collect income taxes in-house

• Hire another municipality to collect the tax

• Hire a private company to do the job

In an interview last Friday, Hillard said right now he would prefer to work with another municipality that, like Dayton, provides a tax-collection service to other jurisdictions. Hillard said he is looking for “a known commodity, one that’s done it before and has experience” collecting taxes.

He said he has been discussing this possibility with other municipalities, but declined to say who they were. Voelkl said Brookville and Englewood have contracted with Vandalia.

To collect its income tax revenue, the Village would have to create a tax collecting system. To do this in less than three months would be “a very challenging endeavor,” Hillard said.

Hillard said his biggest concern is to help make the transition from one tax-collecting system to another as smooth as possible. It is very likely that some tax revenue could be lost during this period, Village officials say.

Making this situation more urgent is the fact that the Village must find a solution by the middle of February, during the 2002 tax season. During last week’s Council meeting, Arnett said, “The most appalling aspect of this is the timing.”

In an interview Monday, Voelkl said, there is “never a good time to make this decision.” Still, he added, tax and withholding forms, which will be available after the first of the year, will now only have to be sent to individuals and businesses once. If Dayton had discontinued the service in the summer, a second set of forms would have had to have been sent out, he said.

“Six months from now would be a bad time,” Voelkl said.

According to Hillard, the Village has 1,427 individual tax accounts; 328 withholding accounts, which are businesses that withhold individual taxes; 194 corporate accounts; and 24 partnerships.

Hillard said he hopes to submit a plan to Council next month.


—Robert Mihalek