Sylvania City Council has taken the first step toward granting a tax holiday, but this tax cut is being proposed by the mayor.
Mayor Craig Stough has recommended that if a property tax reduction is to be given, it should be given from the city's millage collected for debt retirement.
For years, Sylvania has collected 1 mill of property tax for general obligation debt retirement to pay the interest and capital on about $16.7 million of debt the city currently carries, or about $430,000 of property tax each year. The mayor's proposal is to not collect that millage next year.
Sylvania has a reserve in its capital improvement fund, and if the property tax cut was implemented as the mayor proposes, the city could transfer $430,000 from its capital improvement fund into its debt retirement fund.
That scenario, the mayor said, makes a lot of sense because the debt was created as a result of capital improvement projects. Residents and businesses would see a reduction in property taxes if a tax holiday occurs, he said.
During its meeting Monday, council's finance committee didn't take a formal vote on whether to recommend the mayor's proposal because it already has gone through one reading by council, said Barbara Sears, council president and chairman of the finance committee. The consensus of the committee, however, indicates that there will be enough council votes to pass the tax holiday as suggested by Mayor Stough. "It's a great start," she said.
Councilman Doug Haynam, who recently suggested a tax holiday in a different form, said he was pleased that the administration had come forward with input on a possible tax reduction. He recommended that the city forego the collection of an estimated $1.3 million generated by 3 mills of general fund real estate taxes in 2007. When he made the proposal, he said the city had $33 million in the bank, compared with $30 million last year, and the city could afford to give residents a tax cut next year.
Mayor Stough said Sylvania's $33.7 million current fund balance is greater than a year ago because the city has borrowed $4.5 million. When encumbered funds are deducted, the fund balance is $30.1 million in all funds, about the same as last year. Sylvania has $16.7 million in outstanding debt in all funds, and the difference between fund balance and debt is $13.4 million.
Sylvania's capital improvement fund is just shy of $23 million. That means that the city has a surplus above the $15 million recommended in the financial and debt policy approved recently by council.
Mayor Stough said it makes more sense to deduct millage where a surplus exists. The city, he said, doesn't have surplus in the general fund.
Mayor Stough said the city is spending $3 million more from its general fund than it takes in.
Councilman Mark Luetke said he's concerned about cutting taxes if that would result in a cut in services.
"I think our goal is to protect services this city delivers to residents," he said.
Councilman Haynam said neither tax holiday would put services at risk.
Property tax relief is not a new idea in Sylvania, the mayor noted. Several years ago when there was a surplus in the street lighting fund, council agreed to not collect the street lighting assessment for two years, saving taxpayers nearly $500,000.