Northwood City Council at a meeting March 25 gave first reading to an ordinance that would amend the city’s taxation code to eliminate the 10 percent income tax disbursement into the capital replacement fund. Those funds, which total approximately $1 million, would be reallocated into the general fund if council votes for final passage.
The city currently disburses 70 percent of income taxes into the general fund, 20 percent into the capital improvements fund, and 10 percent into the capital replacement fund.
If the capital replacement fund is eliminated, 80 percent of the income tax would be disbursed into the general fund, and 20 percent would continue to be disbursed into the capital improvements fund.
The reallocation would allow the city to use the funds that had been earmarked for capital replacement for other city expenses.
Councilman Dave Gallaher said he is against the proposed ordinance.
“I’m concerned about the costs on the city in the long run,” said Gallaher. “Without the capital replacement money, we will miss that eventually. Originally, when I had heard about this, I thought there would be some other things in the works that would give the city a long term boost as far as funding goes. But this in itself really doesn’t do anything. Basically, it does away with capital replacement, and gives us a carryover in our general fund, maybe. I think it might be giving us a false sense of security by having a carryover and saying, `Okay, we have a carryover now.’ But that in itself is not helping the bottom line. I personally am wondering if we wouldn’t be better off keeping that money in capital replacement and scraping through the best we can with the general fund. It’s kind of like having 70 percent in your checking account, and 20 percent in improvements for the roof, and 10 percent, you’re putting away to buy a new car.
If you do away with that 10 percent and put it into your checking, it makes your checking look better, but when the car falls apart, the money isn’t going to be there to replace it. And I’m not sure that long term, that’s what’s best for the city. It’s moving money around. It’s not really getting us ahead. That’s my concern.”
Mayor Mark Stoner said capital replacement expenses would be drawn from the general fund if the ordinance passes.
“Capital replacement would be for police cars, fire trucks, things like that,” said Stoner. “So if we’re wise, and watch it, that $1 million will last for a while.”
The city has been able to make capital replacements in previous years when the economy was strong, he added.
“We’ve had good years, and all the departments have shared the wealth. So right now, they’ve got pretty good equipment. And I think we can go for a few years like this. Eventually, if we don’t change it back, we could deplete that fund. That could happen. But I think…by doing this right now, at least, it takes away the need for an income tax levy or to change the reciprocity agreement, which I think would be very hurtful to our residents,” said Stoner. “It’s never a good time to go for a tax levy. But when you have the economy in the state it is in now, with people laid off and losing homes, there comes a point where they have given as much as they possibly can give. And that’s why I proposed this.”
Stoner said council can repeal the amendment when the economy improves.
“It’s not that I don’t think this would be in the best interests of the city,” said Gallaher. “But I’m not convinced that, as elected officials, we’ve done everything we can, to address the situation. So I certainly cannot support this. No.”
Council gave first reading to the measure before it approved a 3 percent pay cut for non-union city employees and mandated all non-union management city personnel to take eight unpaid furlough days, effective immediately.
The city has suffered a significant loss in income tax collections since last year, prompting council to lay off city personnel and cut costs.
The finance committee recently discussed the possibility of placing a five year 0.25 percent income tax hike on the ballot, a cut in the tax credit for residents who live outside the city, and a refuse fee to stem further loses in revenue.
Stoner said after the meeting that raising taxes “is a last resort.”
“We could save money by sharing equipment with other communities,” he said. “For example, we have a sewer truck we don’t use every day. We could loan that out to Rossford or Walbridge in exchange for a street sweeper that we could use.”
The city could also save money by participating in regional services, such as police and fire dispatching, and selling city land, he said.
“We have two parcels of land by the Woodville Mall,” he said. “So there are other ways of getting money short of asking voters for a tax increase.”