August 17, 2006

By Diane Chiddister

The Village of Yellow Springs has only a handful of ways to raise new revenues with which to address the 2007 budget deficit, according to a presentation by Village Council President Jocelyn Hardman at Council’s meeting Monday, Aug. 7, and Council chose a property tax hike over an income tax increase because property taxes are less tied to the local economy.

“We have seen a huge loss in jobs, which is why we’re in the mess we’re in,” she said to about 50 villagers who attended the meeting. In the past, local income tax has been the Village’s main source of revenue, and that source was affected by the loss of about 185 jobs at Vernay’s Laboratories several years ago, she said.

“We’ve been dependent on local employment. If we diversify, it’s a better balance,” she said.

Hardman’s presentation covered Village revenue sources and needs, and it summarized more detailed information which was presented by Village Manager Eric Swansen during a series of budget talks over the past several months. Swansen has been presenting information to prepare Council to take measures to address the estimated $1 million deficit in the budget.

After Hardman’s presentation and community input, Council voted unanimously to put on the November ballot a $8.36 mill levy, which would raise about $1 million annually from property taxes, as reported in last week’s News. At the meeting, Village Manager Eric Swansen said the new tax revenues would be divided about equally between funding non-mandated “people services,” such as the Gaunt Park pool, and a new road maintenance program, which is a state-mandated service.

The $8.36 mill increase would cost a homeowner an additional $256 per $100,000 of property valuation, before exemptions.

Council divided the revenue uses equally between the mandated infrastructure services and the more human-oriented non-mandated services to assure villagers that Council was taking seriously villagers’ requests in the past several weeks to continue funding the human services, Hardman said.

“We hope we have a decent balance between the two competing demands, between mandated and non-mandated services,” Hardman said.

Before the vote, Council member Judith Hempfling offered a counter proposal, in which she suggested that Council approve a lower tax hike and halve the amount of money to be spent on the new street maintenance program. She also stated that Council needs to address the issue of affordability in light of the tax increase. Other Council members did not respond to Hempfling’s proposal, and she voted with the others in favor of the $8.36 levy.

Funding options for services
In her presentation, Hardman enumerated the many public services which the Village is required by state law to provide. These services, called mandated services, include road repair and maintenance, police and fire protection, legislative functions and legal counsel, financial and risk management, land use zoning and planning, and management of emergency services.

Services which are not required by the state but which have been added over the years by local choice, called non-mandated services, include the Gaunt Park pool, parks and recreation, the Bryan Community Center, maintenance of the library building, support for Street Fair, street lighting, public parking, social assistance funds, animal control, Halloween bonfires and Village utilities, according to Hardman.

To pay for both mandated and non-mandated services, the Village is allowed by the state to use only a few funding sources, Hardman said. The state prohibits local municipalities from using funding sources such as sales tax (or value added tax), gasoline tax, estate tax, taxes on alcohol or cigarettes, excise taxes on public utilities, highway use tax, and taxes on insurance companies, among others.

The state allows the Village to use as funding sources income tax, property tax, admissions taxes and taxes on hotel and motel rooms, but the number of motel rooms in Yellow Springs is so small that that revenue source would be negligible, Hardman said.

Property vs. income taxes
According to Hardman’s presentation, property taxes are preferable to income taxes not only because they are less tied to the local economy but because they allow the Village to collect taxes from residents who would not pay income taxes. Income taxes only come from wages, and about one half of villagers do not have jobs, according to Hardman, who said the large number of villagers who do not work reflects the growing number of retirees in town.

According to 2000 Census figures presented by Hardman, of the total Yellow Springs population of 3,761, 1,887 residents, or 50.2 percent, work. Out of that number, 1,168 work outside of Yellow Springs, 614 work in Yellow Springs and 105 work at home.

An increase in property taxes creates a better nexus between villagers who pay taxes and those who actually use services, Hardman said. When the Village’s main source of revenue is income taxes, it is collecting taxes from many people who work in town but don’t live here, and therefore don’t use local services.

Currently, the Village’s main source of revenue is its 1.5 percent income tax on earned income. To raise the $1 million which Swansen has stated is needed to address the budget deficit, the income tax would have to be raised an additional 1.3 percent, which would make it much higher than other area municipalities, and would therefore likely discourage potential employers from starting new businesses in town, Hardman said.

Community responses
Several villagers who attended the meeting stated that they appreciated the budget presentation and had gained a better understanding of budget choices and limitations.

“I feel very educated now,” said Paula Cordell, who suggested the Village sponsor a community-wide meeting to provide the budget information. But Hardman said that the Aug. 7 meeting was serving as that community meeting.

It’s not clear which budget choices, mandated or non-mandated services, will ultimately end up being the most essential in attracting new people to Yellow Springs, according to Dimi Reber, who said that, “I don’t think it’s an either/or question. There’s no way of proving what will bring jobs.”

Council member Karen Wintrow said she supported the $8.63 levy because of the difficulty in choosing between human and infrastructure needs.

“The streets are important. Businesses might choose not to locate here because of streets,” she said. “And the pool and library are just as important. I can’t draw a distinction.”

Jaime Adoff, who grew up in Yellow Springs and moved back recently, said he had been watching the Council meeting on TV and jumped in his car to attend in person to offer support for Hempfling’s proposal to put more emphasis on human services and less on road maintenance.

The non-mandated services are “the things this community has always held dear,” he said. “I think the budget for the streets is way overblown.”

In response to Swansen’s statement that he would check with other communities to see how they balance the funding of different kinds of services, Adoff said, “It’s good to look at other communities, but we don’t want to pattern ourselves after others. We are unique.”

Contact: dchiddister@ysnews.com