Comparing the Numbers, Cities Show the Big Picture
Recovery Gauge: Patch towns' income tax receipts tell a story of a post-recession rebound
Seventeen out of 18 Patch towns saw a decline in income tax revenue from 2008 to 2012.
Avon, the only city to see growth, has been experiencing a boom the past decade as more farmland is developed for residential and commercial use. Despite the growth, the city’s income taxes grew from $8.8 million to $10.2 million — collection totals on the lower end compared with other Patch town revenues.
And while other Patch communities saw a decline, not all their income tax receipts fell to the same degree, and not all at the same time.
It’s difficult to directly compare income tax revenues in Mentor to say Mayfield Heights or Westlake because, frankly, each city is fundamentally different.
Each Patch town, like most towns in Ohio, has different industries, socioeconomics, size and geography, accessibility, histories and proximities to other cities. Counties can play a role, too, with regard to other available services and sales tax rates.
Those differences factor into how the city operates and what kind of businesses are in town.
For instance, Cleveland Heights receives the majority of its income tax revenue from individuals because of its history as a residential, or “bedroom,” community with little or no manufacturing. Fairlawn has and is trying to attract more research and laboratory offices, and the city is helped in part because of the University of Akron’s Polymer Science and Polymer Engineering. Brecksville doesn’t want big box retailers and the burnout rate that can accompany them.
Those fundamental differences, to an extent, determined how the city has been affected by and is recovering from the recession.
A similar trend
North Canton’s income tax revenue started to drop in 2007 when the city’s largest employer, the Hoover Company, shut down. Revenue started growing again as the vacuum company’s former plant is redeveloped with new tenants.
Brecksville saw a modest decline in income tax revenue between 2008 and 2010, an increase of $1 million the following year, and for 2012 the city is bracing for a loss. Both last year’s increase and this year’s decrease are attributed to the closure of the Louis Stokes Cleveland VA Medical Center, the city’s biggest employer.
Lakewood saw income tax revenue decline in 2009 and start to increase in 2011, but It’s taken the city several years to recover. All before the recession, the city saw the West End Redevelopment project voted down, a change in mayors, a change in how city finances were balanced and a reevaluation of all spending and services the city offered. The recession just meant the city would have to continue to find ways to do more with less money.
Kent saw numbers relatively flat but during the recession, but receipts are starting to grow as companies move into new, $100 million downtown redevelopment spaces.
Regardless of the story, most city officials said their city income tax revenues were a reflection of the national economy.
Most cities realized the full effect of the Great Recession in 2009. Decreases in employee paycheck withholdings and net profits proved the most alarming; it meant businesses were making less money and people were either being laid off, having wages frozen or taking a cutback in their salary. That decline either continued or bottomed out in 2010 for most.
Many cities saw signs of growth in 2011. That growth looks impressive comparing a stronger 2011 with what for most was a dismal 2010. Some cities even saw a double-digit increase in revenue between the two years.
Finance directors were quick to point that out because there actually was an improvement in tax collections, but for most there remains a long way to go to get back to pre-recession figures.
“You’re seeing improvement on the worst year we’ve had in a long time, so that year has kicked us back several years as far as collection comparison,” said Fairlawn finance director Patricia Bertsch.
But it is improvement.
“I look at numbers and can see recovery because I’m seeing an increase in employer withholding from salaries,” said Stow tax administrator Dennis Bernaciak. Withholding taxes made up 68 of the city’s income tax collections last year. Bernaciak said the numbers show total wages being paid to Stow are rising, though he doesn't know if it’s the result of raises, increased hiring or both.
“It’s significant because increases are in (the) area of withholding,” Bernaciak said. “That is a very good sign because more money is being paid to people working in Stow.”
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Editor’s Note: In this series, Patch gauges the recovery of 18 Ohio communities based on income tax receipts since the Great Recession. Find their individual stories Monday on Patch's Ohio news sites.