Plans to raise Wellington income taxes are being considered to avoid a potential general fund deficit and pay for capital improvements, including a new police station.
Village manager Steve Dupee showed council Monday how four options for tax increases would affect Wellington’s five-year financial picture.
If no tax changes are made, it would result in negative net margins in the general fund starting in 2019, he said.
Residents currently pay a one percent village income tax rate and all options presented Monday would raise that to at least 1.5 percent.
About $1.8 million is generated annually through the one percent rate.
The last municipal tax increase for Wellington occurred in 2002 when a tax credit was abolished for residents who work outside village limits and already paid taxes to another municipality.
Option one would raise Wellington’s rate to 1.5 percent and keep the tax credit abolished, raising a projected $825,000 to $875,000 annually.
Option two would raise the village rate to 1.5 percent but allow a half-percent tax credit for those who work outside the village and have already paid other municipality taxes. That would raise a projected $664,000 to $714,000 annually.
Option three, preferred by both Dupee and mayor Hans Schneider, would raise the rate to 1.75 percent and institute a 1.75 percent tax credit, projecting to yearly revenue of $723,000 to $773,000.
Option four would raise the rate to 1.75 percent, institute a 1.5 percent tax credit, and would bring in a projected $780,000 to $830,000 over the same period.
The Government Finance Officer’s Association recommends that municipalities keep at least enough unused cash in general funds to cover two months of operating expenses, which right now for Wellington is roughly $500,000 but expected to raise to $616,000 by 2023.
“How do we fund a new police station or weather the next economic downturn?” he asked council members. “Right now we wouldn’t be able to react well to, God forbid, losing a large employer. There are many options available here but I want to do better than the minimum of what we need.”
Under state law, voters must approve any tax increase.
Schneider and council members said telling the public specifically how the tax revenue will be spent and sticking to that plan will be vital to getting any increase passed.
“We’re looking at the best ways to fix these balances in the long-term,” said Schneider. “Option three is the one I’ve settled on. It’s imperative we bring back (the tax credit). The community deserves it. I’m not supporting anything that doesn’t offer that. We’re the only community in the county without reciprocity. We’re asking for the public to help us and I think, in that instance, we owe it to the public to bring back reciprocity.”
Oberlin has a municipal tax rate of 2.5 percent and offers a 2.5 percent tax credit for those who’ve already paid taxes to other municipalities. Both LaGrange and Grafton comes in at 1.5 percent with a 1.5 percent credit.
Projected costs to turn the former Elyria Savings and Trust building on West Herrick Avenue into a new police station are $1.5 million, which would come via a 15-year, 3.95 percent interest loan through Huntington Bank.
Council has already approved one measure that’s added roughly $320,000 to general fund: a $100,000 cap for local tax proceeds going to the capital improvement fund.
Before the change, the capital improvement fund would receive 25 percent of those proceeds, or roughly $425,000.
The 2018 general fund budget required a 77 percent reduction in transfers to the capital improvement fund in order to avoid a $271,896 deficit.
When the general fund balance fell to $229,271 in 2013, a measure was passed the following year that sent 5.5 percent of each village utility’s annual revenue to the general fund.
As it stands, 56 percent of the general fund is made up of municipal tax proceeds — 30 percent is from utility transfers and nine percent is from property taxes.
Jonathan Delozier can be reached at 440-775-1611 or @DelozierNews on Twitter.