Income Tax Hike Could be on November Ballot

A citywide income tax increase of 0.5 percent is likely headed to the November ballot for Kent voters.

voted recently following a closed-door meeting to move forward with the proposed hike, which would raise the city income tax from 2 percent to 2.5 percent.

Most of the $2.7 million in annual revenue would pay for the new police and safety building, estimated to cost $18 million. The remaining proceeds would bolster the city fire and police department budgets.

Council members voted June 20 to put the tax hike on their July 18 meeting agenda. If council approves the measure, it will head to the November ballot for voters to decide.

Mayor Jerry Fiala, who votes with council only in the event of a tie vote, said he supports the tax because the city's aging police facility needs to be replaced.

"Bottom line, it will be up to the voters to approve it or turn it down," he said.

By the numbers

The total estimate for the police station fix-up is $18.36 million. That includes cost of debt issuance, razing the existing police station, site preparation, furniture, fixtures and equipment, Budget and Finance Director Dave Coffee said.

The city would use $1.2 million to pay the annual debt service on the new station, and the $1.5 million balance would address "current and projected funding shortfalls for police, fire and EMS services and operations," he said.

Police station 'deplorable'

City administrators have been making the case for a new police and safety building for several years. The existing building was constructed in the 1920s.

One of the more serious issues is the city jail. The jail has not met state standards for several years, but state inspectors have so far given it a pass.

The building doesn't meet Ohio jail standards or the Americans with Disabilities Act, Police Chief Michelle Lee told the Record-Courier. The jail barely even meets city plumbing and electric codes.

"We could be forced to make some more renovations that we’re not financially ready for," Lee told the Record-Courier.

Councilman Wayne Wilson, chairman of council's Finance Committee, described the interior condition of the police department as embarrassing and posing potential safety hazards.

"We’ve had discussions about the police department and the building being in the condition it’s in, which is literally embarrassing it’s in such bad shape," Wilson said. "Luckily we haven’t had the state come down on us for it."

In 2010, a portion of the ceiling collapsed in the administrative offices during off- hours. The city has repaired the building brick facade, its multiple heating and air conditioning units — due to numerous additions over the years — wiring and other problems at great cost, Wilson said.

"Deplorable" is how the mayor described it.

"Even though it’s a huge cost to build this (new) police department, it’s not going to get any cheaper to keep the current building maintained and to keep it running," Fiala said.

Tax hike old recommendation

The idea of a tax increase is nothing new.

In 2005 the city council appointed a committee of residents and local financial experts, formally dubbed the Kent Blue Ribbon Finance Committee, to spend a year reviewing the city budget with council members and administration due to a reliance on reserve cash to balance the city budgets — a practice that has continued in recent years.

In 2006, the panel made several recommendations, including an income tax increase. The panel recommended a hike of either 0.1 percent or 0.2 percent with several other revenue-generating and cost-cutting suggestions.

The city has done most of the panel's recommendations, except for the income tax increase, City Manager Dave Ruller said.

"The city finances have been sort of a struggling point for the city pretty much since Day 1 that I arrived," Ruller said. "And while we’ve done some good things to steady the tide … this is very much a continuation of trying to implement the blue ribbon panel recommendations. So this wasn’t some out of-the-blue concept."

The city has saved about $3 million a year in large part through cuts and implementing some of the panel's recommendations, such as combining staff positions through attrition, sharing services and using technology to cut labor requirements, Ruller said. 

The panel's report also recommended the city invest in economic development to add "high-paying jobs without adding substantial operating costs."

The city has invested about $3 million to redevelop a portion of downtown Kent, most of which represents land acquisition costs. As part of that project, Kent is borrowing another $7.5 million to pay for street work and other infrastructure improvements. That $7.5 million will be paid back through Tax Increment Financing, or TIF, which allows the city to borrow against future property tax revenue created by the redevelopment projects.

But by the time the annual TIF debt service is paid, the city estimates the redevelopment project will generate only between $100,000 and $200,000 a year in additional property revenue until the TIF loan is paid off.

Add in the recent — which is upwards of $500,000 — and Kent is still in the hole even with the property tax revenue generated by the redevelopment, Ruller said.

"It’s important to remember, that downtown investment is essentially self-sustaining," he said. "That’s not taking away public safety dollars. The majority by far of this is self-sustaining, meaning that it’s borrowed money. That money wll be paid back by the new property tax downtown, not the income tax. Unfortunately we knew when that was being done that that wasn’t some magic windfall."

City officials also have argued that a major purpose of the redevelopment has been to add permanent full- and part-time jobs, which will add to the city income tax base. Estimates on the number of new jobs are north of 700.

That new income tax revenue won't be a huge boon, Ruller said, though the downtown revitalizaion has helped create a multiplier effect around the city — another of the panel's recommendations.

"While downtown is certainly looking great, the income tax there is not looking like it’s going to be enough to offset the losses in state taxes," he said.

Limit on the tax hike

Another recommendation of the finance panel was that any income tax increase should expire after a set time period.

Ruller said the city administration included the idea when recommending the income tax increase to council.

"I know that council talked about that in terms of the facility debt ... as far as when the building was paid off," he said. "That’s 30 years from now. And to some extent I think that’s something we could wrestle with then. It didn’t end up being a part of (council's) motion."

Wilson said he doesn't like the idea of an expiration date — a so-called sunset clause — on the proposed tax increase.

"We lack a lot of stuff in both those departments we have not been able to afford," he said. "I don’t know what good a sunset clause would do considering the need will always be there."