Past attempts to increase the city’s tax rate have not fared well in the city of Powell, but a special ballot on May 4 could once again include a proposed increase to the local income tax. However, the city’s most recent attempt to generate more money would also feature a critical component that has often turned voters off to the idea with past ballot measures.
During Tuesday’s meeting of Powell City Council, the first reading of an ordinance pertaining to the restructuring of local tax and credit rates was read. If approved for the ballot by council, residents will then vote on an increased local tax rate of 2%, up from the current rate of 0.75%, which represents one of the lowest local tax rates in the state. Included in the ordinance is a proposed increase to the tax credit rate for those who also pay taxes to the municipality in which they work, which would jump from the current credit rate of 0.25% to 2%.
General unwillingness to approve a tax increase on past ballot measures has often centered around the numerous Powell residents who work outside the city, many of whom work in Columbus. Currently, Powell residents working in Columbus must pay a combined rate of 3%, which is comprised of the 2.5% Columbus rate and a total of 0.5% to Powell after the 0.25% current credit rate. Under the current proposal, Powell residents working in Columbus would see their total tax liability rate drop from 3% to 2.5%.
City Manager Andrew White said during Tuesday’s meeting that the proposed changes to the rates are geared towards a more “fair” structure for all in the city, pointing out the existing gap in taxes paid for those working in Powell compared to those who find their work outside of the city.
“At the low end, we have tax filers who are responsible for 0.5% of total income taxes paid to the city,” White said. “We have folks who are paying 0.75%. And then for those individuals who are paying a combined rate, it’s as high as 3%. So, rates of 0.5% to 3% is fairly volatile.
“What we’ve also noticed through our analysis is that there is a lot of money that, right now because of the structure we have in the form of a credit, is being deposited outside of the city of Powell. Establishing a 100% credit is really anticipated to generate, based on our 2018 estimates, $3.4 million of new income tax receipts to the city. And of those, nearly 80% of that amount is going to come from Powell tax filers who live in another city but work in Powell. So non-residents, in this case, would be picking up a significant portion of that cost.”
White added that 3% of the expected $3.4 million would come from Powell residents.
Councilwoman Melissa Riggins said she views the potential ballot measure not as a tax increase but a tax reduction for many Powell residents because their aggregate tax liability rate will actually be reduced with an increase of the tax credit to 2%. White said it’s unfortunate that a tax structure can’t be tailored to every specific individual, but he feels the proposed structure would garner support on the ballot.
“I don’t have a crystal ball, but I feel confident in the work that we’ve done that, should we go forward, that 100% credit is the story,” White said. “Yes, there will be some offset to a demographic component of the city, but you can’t find anywhere in central Ohio where folks are paying 0.75% for the level of service that’s provided (in Powell).”
Vice Mayor Dan Swartwout pointed out that Powell residents who would receive the tax credit would also benefit from greatly-reduced administrative work in filing with the Regional Income Tax Agency (RITA).
White went on to say he considers the potential proposal a “city investment,” saying, “Yes, it’s an expense, but it’s a necessary investment to perpetuate that what we leave behind when we move on is better than what we took on.” He added that many of the long-term capital improvement projects the city has planned are great, but they don’t have the resources as the budget currently sits for those projects to move forward.
“In order for the city of Powell to continue to be a great place to live, we have to bring in additional funds to make up and pay for these infrastructure improvements,” Councilman Brian Lorenz stated. “As well as, if we want to be a serious development player going forward, and address our plans such as Keep Powell Moving and our comprehensive plan, this is a necessary adjustment that we have to make.”
Councilman Tom Counts stated, “What this proposal really does is weens us away from income revenue from our residents to income generated by non-residents —people who are working in Powell.”
The ordinance will be read for a second time during the next council meeting, scheduled for Tuesday, Jan. 19. Meetings begin at 7:30 p.m. and are streamed live on the city’s Facebook page.