Lean 2019 feared as revenue from income tax lags

Wage stagnation adding to city’s faltering factors.

Columbus has started tightening its belt, but it might need to poke a new hole in it for the 2019 budget if income-tax revenue doesn’t rebound before the end of the year.

Income tax is the largest source of revenue for the city’s nearly $1 billion general fund budget, but a combination of wage stagnation among the city’s largest employers and state changes to collections have left the city short of where it expected to be as it starts to budget for next year.

City officials cautioned that there is still plenty of time left this year for income-tax receipts to hit their projected mark, but they already are preparing to rein in spending in 2019.

“We certainly think it’s going to be a tight budget,” said Joe Lombardi, the city’s finance director. “More than likely, it will be a tight continuation budget.”

That means the budget likely has little room for expansion and new programs next year.

Columbus has several revenue sources for its general fund, but the income tax is the largest by far, representing 78.1 percent. The city also collects property taxes, fines and emergency service fees, among other revenue sources.

After refunds, the city has collected about $526.6 million in income-tax revenue through the end of July. That’s up 0.13 percent over the same period in 2017. But former Auditor Hugh J. Dorrian projected that incometax revenue would rise about 1.9 percent this year.

Each year, the city auditor provides the mayor with a revenue projection. When the mayor proposes a budget to the Columbus City Council, the budget cannot exceed that projection.

Dorrian, who retired at the end of 2017, was famously conservative in his projections, but current Auditor Megan Kilgore said changes the state legislature made to how income taxes are collected were unforeseen and have hurt the city this year.

“He had already planned for a not-so-great year,” she said.

Businesses now can pay withholdings to the state, which then distributes the revenue to cities. As a result, Kilgore said millions of dollars in tax revenue that the city normally would collect near the end of the year now is being shifted to January until it arrives from the state. That means the city can’t count on that funding for the rest of 2018.

Wages for workers at the city’s largest companies also have flatlined, she said. The auditor’s office polled the largest employers in Columbus and found that withholdings at 29 of the top 100 are down compared with last year.

“As much as we’re building around Columbus and all that, we’re not seeing the steady growth of income tax that people would think we are,” Lombardi said.

Kilgore said withholdings from the largest companies help drive income-tax growth. When those companies give smaller pay raises or cut bonuses, the money flowing into city coffers slows down.

So far this year, the city has had three months in which it collected less income-tax revenue than it did the year before. From 2014 to 2017, that happened only twice.

With that in mind, Mayor Andrew J. Ginther’s administration is planning for even slower growth in the budget than it has seen since he took office in 2015. General fund projections the finance department has provided to other department heads total $904 million, up about 1 percent from the $894 million general fund for 2017.

Each department gets a percentage of that projection, Lombardi said. For example, about two-thirds of the budget is dedicated to the Department of Public Safety, which would receive about $601 million under the current projection for police, fire and emergency medical services.

Department heads were required to submit their 2019 budgets by Friday. In September, they will meet with the finance department and Ginther to make adjustments, Lombardi said.

Department budgets often include “target programs” that Ginther wants, but which push costs higher than the projected revenue. During those meetings in September, resources are shifted to accommodate those programs based on Ginther’s priorities, Lombardi said.

Projections for 2019 could increase if income-tax revenue grows faster than it has so far this year, but the administration won’t have a final target from the auditor’s office until October, Lombardi said.

“These numbers are going to be very close to their annual numbers. We have been talking to them for over a year now that we felt that budget going into 2019 was going to be tight,” Lombardi said.