Toledo may eliminate tax reciprocity

2/21/2009

Jay and Kara Wagoner have lived in West Toledo for nearly a dozen years and they each have jobs in suburban communities.

The couple very soon could have a reason to move out of Toledo.

"I love the neighborhood - it's a great neighborhood - and at the time I bought my house, I worked in the city of Toledo, but one of the reasons I bought a house in Toledo was the reciprocity agreement," Mr. Wagoner said. "I knew I wouldn't get double-taxed."

That situation could change if a budget-balancing proposal offered to Toledo City Council by Mayor Carty Finkbeiner - to generate $5.2 million in 2009 by eliminating 50 percent of the tax credit with other cities - receives approval.

Mr. Wagoner works for a nonprofit organization in Perrysburg and his wife is a high school teacher in Sylvania. They are among 19,200 Toledoans who work in neighboring communities.

"We figured out that if this passes, it will cost us about $1,500 more a year and that's the straw that will break the camel's back for us," Mr. Wagoner said.

"Perrysburg has a much lower tax rate and I still write the city of Toledo a $400 a check every year, which is the difference to make me whole with Toledo's [income tax] rate."

The Perrysburg rate is 1.5 percent, while Toledo's income tax rate is 2.25 percent.

Currently, city residents working in other places that have income taxes receive a 100 percent credit for taxes paid to those respective cities.

That means they pay Toledo the difference, if any. Without that credit, those residents would have to pay Toledo's 2.25 percent on top of the taxes withheld by the community where they work.

Mr. Finkbeiner wants those residents to get credit for just half of what's paid to the other city.

Under this proposal, a Toledoan making $36,000 and working in a city with a 1.5 percent tax rate would pay an additional $270 in Toledo.

If the same person worked in a city with a 2.25 percent tax rate, it would mean an additional $405 to Toledo.

"Since we believe that citizens want and deserve essential services such as police and fire protections, it is necessary to make hard choices such as the adoption of the reduced tax credit," the mayor said. "Up to now, Toledo residents working in Oregon have paid no income tax to Toledo in support of the services they receive from the city of Toledo."

The two cities have identical income tax rates. Toledoans working in Oregon will continue to pay Oregon its 2.25 percent, plus half of the 2.25 for Toledo, which is 1.125 percent.

Oregon Mayor Marge Brown said she has 28 city workers with Toledo home addresses who are a little more than angry with Mr. Finkbeiner's plan.

"They are very, very upset, and they think that it's not fair," Mrs. Brown said. "The city of Toledo has told them, 'Now remember, you get all the services,' and they say, 'What services? My leaves are still out in front of my house, my street hasn't gotten plowed once.' So I am hearing the negatives of why they don't think it's fair."

Both Mrs. Brown and Maumee Mayor Tim Wagener balked at a suggestion by Robert Reinbolt, Mr. Finkbeiner's chief of staff, that perhaps other cities reduce the income tax charged to Toledo residents.

Mrs. Brown had a quick reply when told of the idea.

"You want the answer off the top of my head: No," she said. "These people have the privilege of working in the city of Oregon and we have a fine environment."

She questioned whether Toledo would do the same for Oregon residents with jobs across the Maumee River in Toledo.

"I don't think they would," she said.

Mr. Wagener said the idea likely would have no traction with his City Council.

"We have not raised our income tax rate since 1968 and we are very proud of that fact," he said. "The people who work here do enjoy the amenities that we offer and we do have our own budget problems here in Maumee."

The tax credit reduction is now in the hands of Toledo City Council, which received legislation yesterday authorizing the change.

It will be introduced at a council agenda review meeting Tuesday.

Councilman George Sarantou, chairman of council's finance committee, said council would have a meeting dedicated to the idea and the city would conduct a public hearing.

"We will have a meeting to discuss the benefits and the potential downfalls," Mr. Sarantou said. "The question is if we do not adopt it, what other means do we have to bring in $5 million to the budget? If we don't, I see no other option, unfortunately, other than layoffs."

Mayor Finkbeiner warned against dismissing his idea.

"The failure to adopt creates a $5 million issue this year that would need to be filled," he said. City fees are already on the rise.

The mayor wants to generate about $175,000 by freezing the city's trash fee at $7 for those who don't recycle and $2 for those who do. It will otherwise change on May 1 to $8.50 a month for those who don't recycle and drop to $1 for those who do.

Mr. Sarantou said he also wants to compare the tax credit reduction to what is done by other cities. The city of Findlay, which has a 1 percent income tax rate, on Jan. 1 dropped its tax credit to zero. Bowling Green, Ottawa Hills, and Perrysburg have a credit of up to 50 percent of the lower rate.

Mr. Reinbolt said the Finkbeiner administration is not recommending increasing Toledo's 2.25 percent tax rate.

"That is certainly something you have to take to the voters and it takes time to do," he said. "The tax credit plan impacts a smaller amount of people and seems fair."

But raising the tax by 0.25 percent would generate an additional $18 million to $20 million a year, Mr. Reinbolt said.

Mayor Finkbeiner has proposed $14 million in cutbacks and hoped-for revenue to balance the city's 2008 and 2009 general funds.

Along with the tax credit reduction, he wants to save $750,000 by switching to automated trash trucks that need a single driver instead of a three-man crew, reduce the budgets for both the fire and police departments, remove a fire truck from active service, negotiate deep concessions in new contracts with all safety forces' unions, and switching about 150 nonunion employees to nine-hour shifts for four days a week.

Contact Ignazio Messina at:

imessina@theblade.com

or 419-724-6171.