City of Urbana
Proposed Additional 0.6% Income Tax – Frequently Asked Questions
According to local records, the City of Urbana’s income tax was a flat one percent (1%) from 1957 through 1991. In the early 1990’s, it became apparent that the City could no longer provide the level of service the citizens of Urbana expected or deserved at its then current level.
In 1991, after significant investigation and internal evaluation, Urbana City Administration and Urbana City Council agreed that the most beneficial way to bolster its service to the community was to make a concerted effort to enhance the safety services divisions, its Police and Fire divisions. The decision was made to request an additional tax of four-tenths of one-percent (.4%) to the then current one-percent (1%), which would bring the new income tax rate to one and four-tenths of one-percent (1.4%). As with all income tax revenue, 75% of the revenue would be allocated for operations and 25% would be allocated for capital expenditures.
City Council approved Ordinance No. 3876 to place the measure on the ballot and the citizens approved the increase in the November, 1991 election; with the increase to become effective in January, 1992. With the approval of the income tax levy, the City was able to increase the staffing levels of the Police and Fire divisions as well as update the physical plant by expanding the Municipal Building to relocate the Municipal Court, the Police Division and the Fire Division, including their new equipment bays.
For the past twenty-six (26) years, the City has been able to stretch the current 1.4% income tax revenue to maintain the basic services, but in the past eight (8) years, rising operating costs and continual reductions in the State of Ohio’s ‘Local Government Funding’ (LGF) have gradually eroded the financial base for City operations. In order to offset the effects of inflation, loss of Estate Tax monies, and reductions in the Local Government Fund (LGF), operating costs have been reduced to the point where a number of advances that were made since 1992, have been lost.
On July 24, 2018, the Urbana City Council approved Ordinance 4486-18 to again place the City’s first income tax increase since 1992 before the voters. This ballot issue requests voter approval for an additional sixth-tenths of one-percent (.6%) that is solely dedicated to Public Safety (Police/Fire/EMS) (Operating and Capital Improvements). If passed, the new effective income tax rate for the City of Urbana would be 2.0% (effective January 1, 2019).
The ballot issue on the November 6th ballot reads as follows:
“Shall the Ordinance providing for an additional six-tenths of one-percent (0.6%) levy on earned income for the purpose of increasing funds solely dedicated to Public Safety (Police/Fire/EMS) (Operating and Capital Improvements) and sustaining these services effective January 1, 2019 be passed?”
In an effort to provide the public as much information as possible, the following questions and answers have been developed and are intended to help answer questions related to the need for this increase.
1Q: What is the City’s current income tax rate?
1A: The current City income tax rate is 1.40% on earned income, (1% General Fund & .4% Police/Fire).
2Q: What does ‘Earned Income’ mean?
2A: Unlike property taxes, ‘Earned Income’ includes wages, salaries and other commissions earned in the City of Urbana, and does not include pensions, social security benefits, investment income, unemployment benefits, disability benefits or active duty military pay.
3Q: When was the last rate increase?
3A: From 1968 through 1991, the City’s income tax was 1%. Twenty-four (24) years later, in November, 1991, the citizens approved a four-tenths of one percent (.4%) additional tax specifically for Police and Fire operations and equipment.
4Q: So it’s been twenty-six (26) years since the last rate increase?
4A: Yes, the new additional tax was effective January 1, 1992.
5Q: What is the rate of the proposed income tax increase?
5A: Ordinance 4486-18 states that an additional six tenths of one-percent (0.6%) is over and above the one-percent (1.0%) otherwise levied by action of this council and the four tenths (0.4%) of one-percent previously approved by the majority of the electors of the City.
6Q: To confirm, with the proposed additional rate increase, the total income tax will be 2%, including the additional tax increase?
6A: Yes, if passed, the new effective income tax rate for the City of Urbana will be an even 2.0% with 1.0% being solely dedicated to Public Safety (Police/Fire/EMS) and the remaining 1.0% being dedicated to the city’s General Fund.
7Q: How will this new additional tax be spent?
7A: The additional tax will be used specifically for Police and Fire operations and equipment.
8Q: How can the citizens be assured that the money won’t be spent in other departments?
8A: State law mandates, and our City Charter requires, that taxes collected for a specific purpose, must be spent accordingly. There is no local authority to allocate the funds to any other departments, other than Police and Fire.
9Q: How will the additional income be split between the two departments?
9A: As with all income tax revenue, section 6.06 of the City Charter, not less than 25% of the income tax collected shall be placed in the Capital Improvement Fund. These monies can only be expended for capital improvements and debt service for capital improvements. The remaining 75% of income tax revenue will be allocated for operations. Other than that, there is no defined split between the police and fire departments; rather the revenue will be allocated where the need dictates.
10Q: Will the 1% credit be impacted by this change?
10A: No, City residents working in another city receive a dollar-to-dollar Urbana city income tax credit for 100% of income taxes paid to another city, up to 1.00%. The City will continue to recognize up to a 1% credit for income tax paid to their “work city”.
11Q: It is stated that calls-for service have increased. What are the specific details around that statement?
11A: The following statistics support the statement.
· Police Calls For Service:
o 2017: 14,279 (approx.. 9.6% more than 2010)
▪ Drug Offenses: 529 (approx. 5 times 2010)
▪ Drug Arrests: 724 (approx. 9 times 2010)
▪ Felonies: 546 (approx. 3.6 times 2010)
▪ Offense Reports: 2,271 (approx. 1.5 times 2010)
o 2016: 13,158
▪ Drug Offenses: 383
▪ Drug Arrests: 620
▪ Felonies: 415
▪ Offense Reports: 2,123
o 2010: 12,913
▪ Drug Offenses: 107
▪ Drug Arrests: 81
▪ Felonies: 151
▪ Offense Reports: 1,689
· Fire/EMS Calls For Service:
o 2017: 2,756 (approx. 17% more than 2011)
▪ EMS: 2,140
▪ Fire: 464
▪ Other: 152
o 2016: 2,646
▪ EMS: 2,010
▪ Fire: 454
▪ Other: 182
o 2011: 2,295
▪ EMS: 1,708
▪ Fire: 446
12Q: Will this income tax be used to establish a minimum staffing level for each division?
12A: The income tax will not be used to establish a minimum staffing level – it will be used to improve on current staffing conditions, as we consider the ever-changing safety demands of the Police and Fire Divisions.
13Q: What are the tax rates and financial comparisons of cities in our geographic area, or of similar size?
13A: The following table provides a snapshot of similar cities’ financial picture.
14Q: What percentage of the City’s budget is needed to support the Police and Fire Divisions?
14A: Combined, the Safety Services divisions account for approximately 53% of the City’s annual budget, with Police accounting for 24% and Fire 29%.
15Q: I’m on a fixed income. How will the increase in income tax affect me?
15A: Unlike a property tax levy, which levies taxes against your property, only those individuals who have ‘earned income’ will be subject to the change in the income tax rate. See question #2 for definition of “earned income”.
16Q: Will the income tax raise my water or sewer bills?
16A: No, the income tax will not raise your utility bills. The Water and Sewer Divisions are Enterprise Funds, and by law, they must be self-supporting through their respective rate structures. Currently the General Fund provides additional support (subsidies) to:
· Cemetery Fund, because current cemetery revenue (primarily burial fees and lot sales) do not cover the day to day expenses of maintaining the cemetery (mowing, maintenance, etc.).
· Street Fund, although primarily funded through auto license fees and gasoline taxes, weather dependent expenses for road salt and labor for snow/ice events often need additional funding.
The General Fund does not support the city owned Grimes Field Airport. The airport relies on fuel sales and building rent to cover their day to day operations. Capital improvements at the airport are paid from Airport Fund reserves and Federal Aviation Administration (FAA) grants.
17Q: Why doesn’t the City just tap into its reserves, or ‘rainy day’ fund to offset any shortages?
17A: Utilizing the funds in reserve is not prudent and would place the City in a very precarious position, as noted in other communities who allowed the reserves to be used for day-to-day operations. Section 7 of the City’s annual budget appropriation ordinance states, “When financially feasible, the City of Urbana will maintain a General Fund Operating reserve of 15% as indicated by the year-end fund balance. When financially feasible, the City of Urbana will maintain a Police & Fire Operating Fund reserve of 15% as indicated by the year-end fund balance.”
18Q: Will any of the income tax be used for the City Schools?
18A: No, only those services and functions funded and managed by the City of Urbana are supported by the city’s income tax. None of the income tax revenue is used to operate the local schools.
19Q: Are City residents the only source obligated to pay the income tax?
19A: No, the income tax is levied upon businesses and non-resident workers who work in the City to support City services provided to them.
20Q: What impact has inflation had on the City’s income since the last tax increase?
20A: According to the U.S. Consumer Price Index (CPI) calculations, since 1992, the cumulative rate of inflation is 77%, which relates to an item purchased for $1.00 in 1992, the same item would cost $1.77 in 2017, but it is evident that actual costs often exceed the cumulative rate of inflation.
21Q: What is the financial impact of the City’s Safety Services on the City’s annual budget?
21A: Of the 2018 General Fund expected revenue of $6.54M, $3.47M is allocated to Safety Services (Police @ $1.59M and Fire @ $1.88M), which leaves $3.07M to operate all the remaining divisions from the General Fund.
22Q: What are some of the larger Capital funded needs anticipated in the next few years?
22A: Some of the possible long-term capital needs of the Police and Fire Divisions below are outlined below:
-Long-Term Capital Improvement Needs for Police Division:
-Tactic Drug ID Infrared Analyzer: $20,000.00
-Portable Radio System Upgrade: $15,000.00
-MARCS Statewide Radio System (Long-Term)
-Body Worn Cameras: $35,000.00 plus ongoing operational expense
-Special Response Vehicle: $75,000.00
-Sallyport Expansion/Vehicle/Equipment Storage On Site: $200,000.00+
-Enhanced Security Camera System: $25,000.00
-Driving Simulator: $20,000.00
-Response to Resistance Simulator: $20,000.00
-Off-Site Property Storage Garage: $55,000.00+
-Cruiser Replacement (Yearly): $35,000.00 per cruiser
-Long-Term Capital Improvement Needs for Fire Division:
-Replacement for Engine 2: $650,000.00 (2019)
-New Chassis for Medic 2: $120,000.00 (2020)
-Refurbish Aerial Ladder Truck (Quint): $600,000.00 (2022)
-Replace Aerial Ladder Truck (Quint): $1,600,000.00
-Replace Medic 3: $350,000.00 (2022)
-Replace Medic 1: $350,000.00 (2024)
-Replace Medic 2: $350,000.00 (2028)
-Turnout Gear and Personal Protective Equipment for Fire Division (Ongoing)
-Replacement Exhaust System for Fire Division Bays
-Breathing Air Packs (Newest NFPA Standard)
-Remodel Living Quarters for the Fire Division (1996)
-Safety and Security Upgrades to Urbana Municipal Building (Homeland Security)
-Roof Replacement-Urbana Municipal Building-EPDM Rubber (1996)
-Concrete Fire Ramp Replacement on East Market Street, including Curbing, Walks, Etc. (1996)
-Backup Generator Replacement/Overhaul-Urbana Municipal Building (1996)
-Potential Installation of Tornado Sirens to serve City of Urbana only: $150,000.00+
23Q: Why can’t the City just operate with the funds they have?
23A: The City respects and understands the expectations of the community to be good stewards of public funds, and for the past 25 years we have been prudent to operate within our means. Just like the individual budgets at home, the vast majority of city funds are spent on basic, recurring, and necessary operating expenses, with very little, if any leftover funds for discretionary projects. The 2018 annual budget is projected to have a positive balance of $1,625.00, which doesn’t allow for expansion of Safety Services.
24Q: In the introduction, the reduction in Ohio’s Local Government Funding (LGF), what is the LGF and what has been the financial impact to the City?
24A: In the 1930’s the Ohio Constitution was amended to reduce nonvoted property tax millage, and the state’s first sales tax was passed. Ohio’s Local Government Fund (LGF) followed and was established in the 1930’s at the end of the Great Depression as way of providing financial assistance to local governments. The LGF is distributed by the State of Ohio on the basis of population and municipal property tax values.
Since the 2011 reduction in the LGF distribution, the City of Urbana has had its funding reduced by nearly 50%, resulting in an annual reduction of approximately $250,000.00 per year. The reduced funding is expected to continue as the State’s biennial budget was recently approved.
25Q: Will this increase guarantee that no other increase will be needed for another 25 years?
25A: This increase is anticipated to sustain the City’s Safety Services for the foreseeable future. The City’s Administration and City Council will continue to be prudent with your tax dollars.
26Q: Who should I contact regarding further questions about this issue?
26A: If you have any questions on the additional 1.0% tax increase, please don’t hesitate to contact the Mayor, the Directors of Administration and Finance, any City Council member, the Police Chief or Fire Chief, or any Division head for more information.
27Q: When will the additional income tax rate take effect?
27A: If approved by the citizens of Urbana at the November 6, 2018 general election, the new rate will take effect on January 1, 2019.