Lakewood Income Taxes Growing... Slowly

Judging by the city’s income tax collection, Lakewood is climbing out of the Great Recession. 

But there’s still more work to do.

“As we’ve seen our income tax revenues decline over the past couple years, we’ve definitely seen the drop based on the economy and the slow increase the past couple years, but it hasn’t been huge,” finance director Jennifer Pae said. “It’s a slow climb up.”

Lakewood’s climb started shortly after voters rejected the West End Development project. A community group, Grow Lakewood, was formed to look at the city’s strengths and weaknesses, what it should focus on and how to build financial strength. Regarding the last point, the group concluded the city was at financial risk because officials spent the general fund reserves that were at one point in excess of $6 million. 

When became mayor in 2008, he brought in the state auditor's office to conduct a performance review of city finances. State auditors confirmed what Lakewood’s finance office had predicted: the city would face a projected $4 million deficit unless it cut costs.

“Compared to other cities we were, by our own doing, forced to start making some changes before changes in the economy started to hit,” Pae said. 

City council voted to have balanced budgets, so projected expenditures could not exceed projected revenues. Essentially, city officials couldn’t dip into reserves to make up the difference. Officials cut expenses to do so, and then in 2009 the city’s revenue started falling — primarily in income tax collections.

Income tax revenues were down about 5.5 percent in 2010 compared with 2009. The city needed to cut expenses again. Staffing levels stayed the same and city departments either saw expenditures frozen or got less money. The city stopped backyard trash collections and offered a tax amnesty program that waived some late fees for late filers. That helped the city collect about $500,000. 

Total income tax collections were

• $18.2 million in 2008
• $18.5 million in 2009
• $17.7 million in 2010
• $18.8 million in 2011 and
• $9.3 million through May 31, 2012.

“I think our income taxes have been reflective of what the overall economy has been,” Pae said. “The city of Lakewood is unlucky in that way because we’re primarily residential in make up. We have some commercial but no malls, no big box stores, very little industrial. What’s good about that is we’re relatively stable, not relying on one big industrial (employer) like Ford or American Greetings.”

Pae said the challenge now is looking at how the city can sustain and continue to grow while staying fiscally strong.

“Our strategy has been continuing to look at what businesses should the city be in, what services should we be providing, what can be provided elsewhere,” Pae said, adding the city no longer operates the ice rink and has outsourced the health department operations to Cuyahoga County. 

Officials are going to capitalize on the city’s neighborhoods, walkability, commercial corridor and century-old housing as it continues to move forward with recovery and development. Economic development director Dru Siley said he thinks the city is doing well considering the recession.

“I think the income tax numbers only scratch the surface,” he said. “What we’ve seen and what we’re going to be realizing in the years ahead is the growth we’ve had from commercial investment in new jobs, either companies that were here expanding or new companies locating because they needed room to grow. I think it’s the potential growth that we’re going to realize over the next few years that’s going to tell Lakewood’s story — that we’re well positioned to just keep getting better on the economic front.”

In the past four years, Lakewood officials witnessed a noticeable increase in interest from developers and investors. The city has received more than $60 million in private investment and reinvestment along the city’s main commercial corridors, Detroit Road and Madison Avenue.

That’s good news for the city because while somebody is always paying property tax, an empty storefront is unrealized income tax revenue.

Occupancy rates for first floor retail along Detroit Road were 91 percent the past year, up from just over 80 percent five years ago. Similarly, vacancy rates along Madison Avenue are at 15 percent, down from 22 percent five years ago. And only 300 of the city’s 13,000 homes are vacant. 

“We have no illusion that a large company is going to be moving to Lakewood; that’s really physically not possible,” Mayor Michael Summers said. “So, we’re going to continue to attract small incremental gains along the way. We’re calling that very successful. And it is very successful for us. We have a lot of work to do to deliver some steady increases, steady but small, but nothing dramatic is going to happen in the short term.” 

There’s the , and Lakewood Bailey buildings. The has a presence and is projected to grow. Storefronts are changing. There’s a new and . People might not be excited about drugstores and golden arches, but those stores may encourage other businesses to relocate here.

In the last 18 months, Siley said he’s seen an increase in the number of small technology companies, a target industry the the Grow Lakewood report identified.

“We have a highly educated population,” Siley said. “We’re seeing more folks staying in Lakewood and then coming to Lakewood who have stronger earning potential. 

“We have those companies here that have either been here and are growing or newly relocated and growing. I think that’s a big part of our story.”

Editor’s Note: In this series, Patch gauges the recovery of 18 Ohio communities based on income tax receipts since the Great Recession. Read about