City Budget Tight, Tax Credit Reduction Being Explored

Officials say the budget is so tight that the City of Marion is living day-to-day and there doesn’t seem to be any easy answers on how to improve the financial situation. The City Administration is exploring ways to increase revenues, including a possible reduction in the income tax credit.

During the monthly budget review at the City Council’s Finance Committee meeting Tuesday evening, Marion City Auditor Kelly Carr reported the City spent $4,000 more than it had in January. That’s even taking into account the use of $246,000 in carryover funds from 2011.

Carr said that looking at revenues for January the City is up about $46,000 compared to 2011. Even so, she stated that compared to a 4-year average the revenue is down about $12,000. She said the City seems to be on track when it comes to the budget, but warned that it’s very early in the year.

Councilman Dale Osborn asked about how expenditures are comparing to last year. Carr said she didn’t compare those numbers, but stated that, looking at the percentages used up to this point, it seems things are on target.

“I didn’t see anything that stood out and made me say ‘this department is going crazy’,” said Carr.

Osborn expressed concerns over being able to make payroll considering the negative balance that was reported. Carr said this has not been an issue because there is constant income. She said that as of Tuesday, the City is in the black by over $80,000.

Osborn stated that is seems like the City is not just living paycheck to paycheck, but is actually living day to day. Carr agreed with his assertion.

When asked by Osborn if she believed the City would end 2012 in the black using the current budget, Carr said, “No.” She said she believes the City will hold the budget, but will not improve its financial situation, inferring that the City will not have additional carryover at the end the year.

Councilman Josh Daniels questioned how the City could continue to operate with such a tight budget. He warned that at some point this could fall apart badly for the City. He said Council and the Administration needs to be having a conversation on what expenses need to be cut or ideas on how to increase revenue.

Carr agreed with Daniels and cautioned that more cuts are on the horizon, including the elimination of the estate tax and another 25 percent decrease in local government funding. The estate tax means around $300,000 annually to the City.

When it comes to saving money, both Daniels and Osborn expressed being in favor of combining the City and County emergency dispatch services.

During a later part of the meeting, the Committee returned to the idea of ways to increase revenues for the City of Marion. Mayor Scott Schertzer was telling the Committee that ways of increasing revenues without raising taxes were being explored. As an example, he mentioned they are discussing a change in the tax credit for those people living within the City of Marion, but working in another town.

Simply put, the tax credit works like this: if a person lives in the City of Marion and works in Columbus, that person does not pay any income taxes to Marion because the tax in Columbus is higher.

Mayor Schertzer said the plan being discussed would change the 100 percent credit to a 50 percent credit.

Daniels questioned how this idea would not be defined as not increasing taxes, when it would mean people who were paying no taxes would suddenly be paying nearly a percent income tax. Daniels said he believes that reducing the credit would be a detriment to Marion, explaining he believes that it provides an incentive for people to live here.

Carr reminded Daniels that the people affected currently pay nothing to the City of Marion, but still receive the same services as people who work within the City. Daniels agreed, but said there are also many people who work within the City, but do not live here, meaning they are paying taxes for services they are not receiving.

Carr said there are positives and negatives, but said that many communities have started implementing the 50 percent credit.

The Finance Committee took no action Tuesday. The budget review occurs monthly and the Committee plans to continue exploring ways to reduce expenses and increase revenues.