June 15, 2006

By Diane Chiddister

At the meeting of Village Council on Monday, June 5, Village Manager Eric Swansen presented an overview of potential new Village revenue sources and potential cuts or reductions of services to help address the deficit in the 2007 Village budget.

In the written summary of his presentation, Swansen wrote that the Village faces “an unprecedented period of financial distress, which will likely result in the reduction of services, obtaining voter-approval for new revenue sources or both.”

After making his presentation, Swansen stated, “It is sobering.”

Prompting the presentation is the current Village budget deficit, which is close to $1 million. The total deficit of $967,943 encompasses three utility funds and the Village’s General Fund. The electricity fund deficit is $362,108, the water fund deficit is $145,921, the sewer fund deficit is $92,196 and the general fund deficit is $368,348, he said. The utility fund deficits are troubling but less worrisome, according to Swansen, because the Village may find ways for the funds to replenish themselves. However, he said, there is no clear way to make up the General Fund deficit, which will only increase each year due to inflation.

In response to the financial problems, Council last month approved a plan to offer early retirement to employees. Council has said it is considering putting on the November ballot some kind of revenue increase, such as a tax, for voter approval.

Swansen’s June 5 overview of potential revenue sources and service cuts was requested by Council at a special meeting that took place May 6. On May 22 Swansen presented to Council an overview of the services which the Village is mandated to provide, including legislative functions, financial management and auditing, street maintenance, police and some legal services, such as Mayor’s Court. Council will continue to explore budget issues at its June 19 meeting, when Swansen will present information on capital needs.

Resource options
The Village may levy income taxes, real property taxes, user fees and fines, admissions taxes, special assessments, hotel/motel room accommodations taxes and personal property taxes, which are being phased out, according to Swansen.

The Village income tax rate is currently 1.5 percent, which was established in 1994. The Yellow Springs school district also collects a 1 percent income tax. More than 500 municipalities in Ohio collect income taxes, ranging from 0.4 percent to 2.85 percent, Swansen wrote in his summary, and a few communities in the area, such as Bellbrook, Clifton and Beavercreek, do not collect income taxes.

Yellow Springs has a reciprocal credit rate for its income tax of 100 percent, which means that people who work outside of town are not taxed twice. Because Yellow Springs has a 100 percent tax credit on the reciprocal rate, a Village resident who works in a community that collects anything less or equal to the Village tax rate, does not pay any tax to the Village.

Some communities do things differently, according to Swansen. For instance, Springfield currently collects a 50 percent reciprocal rate, meaning that Springfield residents receive only $1 in credit on the Springfield income tax for each $2 of tax paid to other municipalities. Consequently, Springfield collects from a resident who works out of town half of what the city would receive in income tax if the person worked in Springfield, plus all of the difference between Springfield tax rate and that of the work place, if the Springfield rate is higher. Xenia and Springboro also have less than 100 percent reciprocal credit, according to Swansen’s summary.

Any increase in income tax rate requires a majority vote of Yellow Springs residents. To raise $1 million in additional revenue annually, the Village would need to add 1.3 percent to the existing 1.5 percent income tax for a total of 2.8 percent. The highest tax rate in the state is currently 2.85 percent, according to Swansen’s summary.

The disadvantage to raising income taxes is that they are tied to the health of the local economy, and income taxes fall when employment falls, Swansen said. Also, the tax is regressive, which means that a greater proportion of the income of lower income villagers is collected than from higher income taxpayers. A higher income tax may also be a disincentive for attracting new employers, according to Swansen’s report.

The Village may also collect real property taxes on the value of land and buildings on a property. Property taxes are based on millage rates, or mils, and currently the millage rate in Yellow Springs is $87.85 per $1,000 in assessed value of property.

Currently in Yellow Springs, the owner of a home valued at $227,500 pays $6,050.24 in property tax, of which the Village receives $175.46, according to Swansen’s summary. Overall, the Village receives 2.9 percent of the entire property tax, while the Yellow Springs school district receives 73.5 percent, the county receives 14 percent, the township receives 5 percent and the health district receives 0.7 percent, according to Swansen’s summary.

For the Village to receive $1 million more in new property tax revenues, voters would need to approve an $11 increase in millage, which would create a tax rate of $98.85 per $1000 of assessed value, and would increase the property tax on the $227,500 home by $804.39, bringing the total tax to $6,854.63.

An increase in real property taxes would also require voter approval. Advantages to property tax increase would be that it creates a revenue stream not dependent on local employment, and is tax deductible on federal income taxes, according to Swansen’s report, which also states that the property tax would “create a better nexus between those who use services and those who pay taxes than the existing income tax.”

Other revenue sources
According to Swansen’s summary, the Village has “wide latitude to establish user fees for services.” While user fees — many of which are already being collected, such as fees for utilities, land-use permits, pool admission and room rental — recover the cost of providing certain services, they are not a revenue source that could add to the Village’s discretionary revenues, Swansen wrote.

Many current user fees were established by ordinance many years ago and have not been changed to reflect the current cost of providing the service, Swansen said. While the Village staff has a model for revising the fees, it is time consuming to complete and may require one-time changes to many parts of the Village code.

According to Swansen’s summary, the “current state of the art in setting user fees uses a methodology based on personal versus community gain,” which makes services with higher levels of personal benefit cost more. For example, the youth swimming admission price is considered at the medium level of personal benefit and the medium level of community benefit. Currently, 40 to 50 percent of the pool costs are recovered with user fees.

Other income sources include admissions taxes, which can be collected from users of theater, music or visual arts displays, and hotel/motel taxes. Both revenue sources would result in relatively little income, according to Swansen’s report.

Service cuts
Swansen’s summary offered “rough, planning-level” estimates for the elimination or reduction of a variety of services.

Currently, the Village is saving $75,000 annually by keeping open a police captain position, which was formerly occupied by current Police Chief John Grote. The position is supervisory, and the person in the position performs special investigations, handles special assignments and coordinates patrol efforts. Grote is currently serving in this position, along with that of police chief. While leaving the position vacant saves an ongoing amount of expense, it also reduces the level of police service to the community, according to Swansen.

The elimination of 24/7 local police dispatch service would save the Village approximately $90,000 per year, according to Swansen. The cut would save an ongoing amount, provide access to better technology, and develop a framework for regional cooperation, according to his summary. However, the move would require higher one-time costs to make the change operational, and the exact cost of the change is not yet clear. The move would also mean using regional dispatchers who are less familiar with Yellow Springs residents.

The Village would save $126,000 a year with a reduction of police staffing, according to Swansen. This move would mean that instead of having one officer working days and two officers during evening hours, there would be two officers on duty together only on weekend evenings. The move would provide ongoing savings, but would also reduce police service, and possibly safety, for the community and the officers, according to Swansen’s summary.

Potential Village program cuts include the elimination of John Bryan Center as a community center, with a savings of $88,000 per year. This change would result in no longer having the center open for community events on the second floor as well as closing the youth activities room, thus saving heating and maintenance costs. It would result in ongoing savings, but could mean more youth activity could take place elsewhere, in unsupervised locations. It would also limit meeting space for community events.

The Village would save $2,500 yearly if it closed the Bryan Center youth center alone.

The Village could provide only minimal level of service at Yellow Springs parks, resulting in a savings of $110,000 yearly. Ball fields would be closed, and minimal mowing efforts would be made. While this move would reduce energy use and reduce costs, it would also limit youth and adult organized sports activities and result in park appearance that some would find unsightly, according to Swansen’s summary.

The Village Mediation program could be eliminated for $6,100 a year, thus providing an ongoing savings but also possibly increasing tensions between villagers who use the service, according to the summary.

Eliminating the use of Gaunt Park Pool would save the Village $70,750 yearly, but would also result in fewer activities for villagers and youth during the summer and reduce opportunities for health and fitness.

The Yellow Springs Library could be closed for an annual savings of $30,000, which would reduce costs for library upkeep but would result in reduced activities for youth and adults.

Non-arterial streetlights in the village could be eliminated for an annual savings of $110,000, which would save money but also decrease visibility at night for cars and for pedestrians.

In other Council business:
• During the citizens’ concerns part of the meeting, villager Jerry Papania expressed his concern about Antioch College’s plan to run its chiller during nighttime hours, with a new sound barrier installed. Two years ago, during the summer of 2004, the college was repeatedly cited for noise violation based on complaints brought by Papania, whose home is adjacent to the chiller. The instances led to the creation of a new Village noise ordinance, after the old ordinance was found to be unworkable by a Xenia judge.

The problem, according to Papania, is that the college plans to go ahead with its chiller activity but has not presented evidence that the chiller meets the noise code.

“The outcome will be if it fails, the Village will be put in the position of enforcement and litigation again,” said Papania, who encouraged the Village to review the Antioch noise application before the equipment begins operation.

But reviewing all potential noise applications puts too much responsibility on the Village, which would have to train an employee for that purpose, according to Council President Jocelyn Hardman, who said the Village’s responsibility is to enforce its law.

Judith Hempfling disagreed, stating that “The Village needs to be proactive,” in heading off possible noise violations, since excessive noise can harm villagers’ health and well-being.

Swansen said he would contact other municipalities to see how they handle disruptive noise situations.

• Council unanimously passed a first reading of an amendment for the Cable Advisory Board which would increase the number of panel members on the board from five to six and decrease their length of service from five years to two years.

“We’re looking for more participation for the panel and to be able to meet the quorum more easily,” said Paul Abendroth of the panel.

Contact: dchiddister@ysnews.com