|The following questions address many of the issues we have heard from our citizens regarding the proposed .5% income tax increase. This information is intended to provide the voters with the facts surrounding this issue so you may make an informed decision on Election Day. As always, City Council and Staff welcome any questions or comments you may have on this tax issue.
Q. Is the proposed .5% income tax increase a property tax levy?
A. No. If passed, the .5% income tax increase would bring our existing 1% income tax
rate to 1.5%. Our income tax only affects residents working in Monroe
(approximately 1/3rd of all working residents). A property tax was not considered because it would affect all residents owning property in Monroe.
Q. Will my property taxes go up if the tax increase is passed?
A. No. Because the income tax is not a property tax levy, your property tax bill will not be affected by any income tax increase.
Q. Doesn’t the City fund most of its operations from revenue collected from Monroe property
A. No. A common misconception is that a City receives most of its revenue from property taxes. In fact, Monroe receives only 12% of every real property tax dollar. The majority of your property taxes (72%) go to the Monroe School District, as this is the primary funding method for Ohio public schools. Monroe’s 12% portion equates to approximately $400,000 annually and comprises only 10% of all the City’s general fund revenue. This is a small figure compared to our estimated $2,600,000 annual income tax revenue (2003).
Q. Monroe is experiencing tremendous residential growth, doesn’t this generate a lot of property tax revenue?
A. No. On average, the City loses money for most houses having a value less than $300,000. This occurs because the cost of services per household exceeds the property tax generated on most of our houses. This is a key reason why City Council has consistently preserved industrial zoned land when residential developers seek rezones of these industrial parcels in order to develop large residential subdivisions. We have allocated approximately 60% of our total land area to high tax base producing industrial and commercial zoning disctricts to reduce the long term tax burden on our residents.
Q. Who is specifically affected by an income tax increase?
A. Any individual working in Monroe is subject to income tax withholdings. Approximately 1/3rd of our residents who work are currently employed in Monroe. The other 2/3rd of our working residents are employed in other cities and villages and pay income tax to those jurisdictions. The overwhelming majority of our income tax collections are withheld from individuals who are employed in Monroe, but live in another community.
Q. Are retired Monroe residents affected by an income tax increase?
A. No. Monroe retirees who are not employed pay no local income tax.
Q. What is the income tax credit and how is it affected by an income tax increase?
A. An income tax credit (commonly referred to as “reciprocity”) provides those who work outside the city they live in to offset the local income taxes they pay to the city where they work. If the proposed income tax increase is passed, the ballot language states that full credit will be established up to 1.5% (currently the tax credit is at .5%).
Example #1. A Monroe resident who works in Dayton is taxed in Dayton at that city’s income tax rate of 2.25%. Since Monroe’s tax rate is less than Dayton’s, he would receive a full income tax credit from Monroe of (1.5%) and therefore pays no local income tax to Monroe.
Example #2. A Monroe resident who works in Fairborn, where the income tax rate is 1%, he would be credited for that 1% in Monroe but still be taxed by the City of Monroe at a rate of .5%.
Q. How much revenue would be generated by the increase?
A. We estimate that approximately $680,000 in new (net) revenue would be generated in 2004, if the tax increase passes. This figure is based upon the assumption that the current (.5%) tax credit is restored to a full credit (1.5%). The city would lose the funds generated from the .5% tax credit (equaling $750,000). Therefore, the net figure of $680,000 is arrived at by the following process:
Total new income tax created by increase $1,430,000
Lost revenue by restoring tax credit - $ 750,000
Total new net tax revenue for 2004 $ 680,000
Q. Why does the City need this additional revenue?
A. The City requires the extra revenue to maintain our level of services and to provide for the capital improvements that will be needed in the future as demand for those services grow through new residential and business growth. Among the required capital investments we anticipate over the next few years include: the State Route 63 widening project, street resurfacing, parkland development and fire / police equipment replacement. With additional income tax revenue and continued strong industrial growth, we are attempting to minimize the need for future property tax levies to fund future capital improvements.
Q. How do the Police and Fire Departments benefit from this proposed tax increase?
A. Because the Fire and Police Departments represent the majority of general fund spending, the ballot language states that 1/3rd of all future annual income tax revenue shall be designated exclusively for Fire and Police operations (Example: $3,900,000 annual income tax collected = $1,300,000 dedicated to Fire and Police).
Q. Does the 2002 Financial Audit Report have anything to do with the need for the extra revenue?
A. No. As early as 1997, City Council discussed the possibility of seeking a .5% income tax increase from the voters. At that time, we knew our growth was increasing dramatically and new revenue would be required to maintain service levels and fund capital improvements. Over the past eight months, City staff has cut or created savings exceeding $2,300,000 from the 2003 and 2004 budgets without affecting resident services. However, we know we will not have the necessary funds needed to complete the many capital improvement projects the City will require. We will be forced to find new revenue through either an income tax increase or property tax levies.
Q. What is the City doing to correct the issues raised in the recent 2002 Audit Report?
A. The current administration has made significant changes over the past several months to correct most of the issues raised in the 2002 Audit Report. The actions include:
- Implementation of an independent Audit Committee beginning with the review of the current 2002 Audit.
- City Council is provided with the City’s cash reconciliation, year-to-date and budget-to-actual spreadsheets within three weeks of the prior reporting month.
- A third member of City Council was added to the Council Finance Committee.
- Staff intends to propose amendments to the City’s Administrative Code to mandate certain financial reporting requirements by the City Manager to further insure all pertinent information is transmitted to City Council in a timely manner.
- A semi-annual appropriations budget review between Staff and Council has been implemented.
- Staff has facilitated Audit Conferences with City Council and the Auditor so the annual Audit Report is directly relayed to City Council by the Auditor performing the review.
- The City will continue to review and enhance its budgetary procedures from the input received from the Audit Committee, Staff, City Council and the Auditors.