Toledo's income tax collections up $2.3M

Officials warn city still on shaky ground

5/27/2011

Workers and businesses in Toledo have paid more income taxes to the city so far this year, a positive sign for the economy and for the city's beleaguered coffers.

Figures released Thursday showed the city of Toledo collected almost $2.3 million more in income tax from January through April of 2011 compared with the same period last year. The numbers appear to reflect a decrease in the local unemployment rate and increased activity at area businesses, officials said.

Toledo's unemployment rate dropped to 9.7 percent in April, the first time in more than two and a half years that it has fallen below 10 percent. In April of last year the jobless rate was 12 percent.

At the same time, the city's overall income tax collection rose from $32 million in the first quarter of 2010 to $34 million last quarter.

"What this means is that clearly people are getting back to work and paying taxes which helps our revenue base," city councilman and Finance Committee chair George Sarantou said. "It shows that there is a trend and that the economy is on the upward spiral."

The news was a catalyst that assisted Toledo City Council in a decision earlier this week to restore the contract for the Toledo Police Command Officers' Association union. The 9-1 vote Tuesday swings the full 10 percent employee share of the members' pension contribution for 2011 back to the city, and reduces the amount members will contribute to their health-care coverage -- concessions that were imposed for almost 14 months because of the urgency of the city's financial crisis.

Nevertheless, Mr. Sarantou and fellow officials cautioned that the income tax numbers are no panacea for the city's budgetary strains. Income tax collections are still several million dollars lower than 2008 levels and the uptick in the economy remains slow.

"This by no means means that we are out of the woods," Mr. Sarantou said. "We still have a tremendous amount of financial challenges ahead of us as a city and as a region."

He pointed to the city's $50,000 rainy day fund, a far cry from the $15 million Toledo held in reserve in 2002. The city had to use that money to pay for services after running into financial trouble during the recession.

City finance director Patrick McLean also stressed that Toledo remains on shaky financial turf, despite the encouraging income tax numbers. Overall revenue to the city is not expected to go up, he said, and there are a number of threats to its financial health. These include the state budget, still under negotiation in Columbus, which could cut revenues to the city. A proposal to scale back the estate tax this year could lead to a $3 million loss for Toledo, Mr. McLean said.

"We still have a great deal of risk out there," he told the finance committee. "We want to temper the good news on the income tax side with a heavy dose of reality on the overall aggregate perspective."

In response to the positive income tax numbers, University of Toledo professors David Black and Oleg Smirnov increased their predictions for the City of Toledo's total income tax collection this year to between $149 and $150 million, up from an earlier forecast of $143 million. If those numbers bear out it would mean at least a 3 percent rise in tax revenue for the city over 2010 levels.

The professors also pointed out, however, that revenue collection remains low compared to 2007 and 2008, and said it would take a much stronger economic recovery for the city to reach those figures again.