Northeast Ohio municipalities are seeing their income tax revenue rebound from the depths of the Great Recession.
An Akron Beacon Journal survey of all cities and villages in Summit County and select communities elsewhere found that nearly every one (38 out of 39) collected more in income taxes last year than five years earlier. Only Northfield saw a decline.
Some places — among them Boston Heights, Lakemore, Mogadore, New Franklin, Norton and Tallmadge — saw increases of 30 percent or more.
“We hope it continues,” said Amy L. Arrighi, chief legal counsel for the Regional Income Tax Agency (RITA), which collects the tax for communities throughout the state.
The outlook wasn’t so rosy just a few years ago, when the majority of communities reported no growth or declines because of the troubled economy and high unemployment.
At that time, many cities and villages were slashing services and workers and delaying projects. Some were boosting income tax rates to make ends meet.
“It is starting to improve,” said Fairlawn Mayor Bill Roth Jr., whose community has experienced a 27 percent increase in income tax revenue since 2009. “We’re not out of the woods yet, but compared to five years ago when we had that big hit, things have definitely gotten better.”
Municipal officials attributed the recent increase to a general improvement in the economy. Statewide unemployment has fallen from its seasonally adjusted peak of 10.6 percent in 2010 to 5.7 percent in April.
Lakemore, Macedonia, Twinsburg and Streetsboro are among the list of communities that also saw increases because they raised their tax rate or lowered the income tax credit allowed for residents.
The income tax growth appears to hold true statewide. Ohio’s income tax revenue grew 17 percent over the past five years. Meanwhile, 85 percent of the communities and joint economic development districts that RITA serves experienced increases.
But Kent Scarrett, spokesman for the Ohio Municipal League in Columbus, warned that any increase in income tax revenue isn’t making up for the state funding cuts experienced in recent years. For example, communities are losing out on about $300 million due to the elimination of the estate tax, he said.
Mogadore, Boston Heights
Mogadore, a Summit County village of 3,900 people, was facing the loss of a full-time police officer and cuts to the part-time fire department staff when voters headed off trouble with a quarter-percent income tax increase in 2010.
While some of the village’s 52 percent increase in income tax revenue since 2009 can be credited to that hike, local business growth has also bolstered the budget, Mayor Mike Rick said.
Rubbermaid added about 100 jobs, and Omega Labs has grown significantly, he said.
“We didn’t lose any major employers during the recession,” Rick said. “Sometimes, good luck comes into play.”
This year, Mogadore will be able to afford to build an addition onto the Street Department building for about $40,000, allowing trucks and equipment to be put under cover.
Income tax revenue also is enabling Mogadore Fire Department to keep two firefighters on duty around the clock.
Still, Rick said, the new revenue isn’t exactly a windfall.
“We’ve lost between $300,000 and $400,000 a year” from the loss of state local government funds and the elimination of the estate tax, he said. “A lot of the income tax increase is just replacing money we lost.”
Meanwhile, Boston Heights, a village of about 1,300 people, saw its revenue climb 51 percent.
Fiscal Officer Betty Klingenberg attributed the increase to some housing development in the community and the addition of Paychex Inc.
The payroll services company opened an office on East Hines Hill Road and now employs 135 workers at the site.
Linda Bowen, the village council’s finance chair, said there was no particularly large blow to Northfield when the area’s income tax receipts were plummeting.
Like most communities, the loss came from small businesses. Northfield Plaza, for instance, lost a few tenants, she said.
While Northfield did not return to pre-recession income tax levels by the end of last year, revenue from the new Hard Rock Rocksino at Northfield Park is now coming into village coffers.
“We’re hoping to use it to fix our streets, and hoping down the road to build a new village hall,” Bowen said.
Until now, “we’ve been getting by,” she said. “We weren’t able to do a lot, but we were holding our own.”
In northern Summit County, the cities of Macedonia and Twinsburg both persuaded voters to approve temporary income tax increases during the recession.
Macedonia officials reported that between 2007 and 2010, one in five jobs had disappeared, along with $5 million in income tax revenue. Faced with massive layoffs at city hall and the services that go with them, voters hiked the tax for three years.
This year, even with the tax back to its original 2 percent, the city expects to end the year with a $2.5 million carryover.
In Twinsburg, city officials didn’t even campaign to keep the quarter-percent income tax that was set to expire last year.
Voters had granted the hike in 2009 to help soften the loss of the Chrysler Stamping Plant, which employed more than 1,000.
As promised, City Council gave voters the option of ending the hike in 2012, and they did.
Twinsburg credited its healthy budget to the arrival of new businesses like the Twinsburg Family Health and Surgery Center (300 jobs), Verizon Wireless (100 jobs), Windstream Corp. (120 jobs), and the growth of existing companies like AssuraMed, which now has about 1,000 employees.