The fate of an income tax reconfiguration in the city of Powell is now in the hands of its residents after Powell City Council on Tuesday unanimously approved the language of a measure to be placed on the May 4 ballot. Proposed is an increase to the city’s income tax rate from 0.75% to 2%, as well as an increase of the tax credit residents receive for working outside of Powell.
As it stands now, Powell’s income tax serves as the lowest in central Ohio and one of the lowest in the state. Currently, residents who find their work outside of Powell receive a tax credit of 0.25%. For those working in Columbus, that means the total tax hit to their income is 3% given Columbus’ 2.5% rate.
The stark contrast in total taxes paid for those working outside of Powell compared to residents who both live and work in the city, as well as those who only work in Powell, has largely been the downfall of past attempts by the city to increase the local tax rate and generate additional funding it says is sorely needed to maintain capital infrastructure within the community.
“This is essentially an equity argument,” City Manager Andrew White said of the proposed changes during Tuesday’s meeting. “It is a restructuring of the city’s income tax credit to positively benefit 80% of our current residents. It’s not necessarily an increase, but the economics of it work out. As (Councilman) Tom (Counts) pointed out through some of the conversations we’ve had with the Finance Committee, there are literally millions of dollars per year being exported out of the city of Powell because of the imbalance created in our low tax rate combined with our low credit.”
White said the rate changes are expected to generate upwards of $3.5 million dollars for the city, if approved, with “the most significant component being paid for by individuals working in Powell but claiming a home residence outside of the city.”
In a press release announcing the resolution, the city pointed out that much of its critical infrastructure was constructed in the late 1980s through the early 2000s, and that “expiring development revenue from this period exacerbates budgetary imbalance.”
“Failure to address the issue will delay infrastructure investments, squeeze operational resources, and eventually reduce service delivery which impacts the quality of life,” White said in the release.
The release further stated, “Additionally, in the past, Powell’s funding for capital infrastructure and maintenance came mostly from gasoline and estate taxes and Ohio’s Local Government Fund. In recent years, the State of Ohio has dramatically cut the Local Government Fund, and it eliminated the Estate Tax in 2013. Due to decreasing revenue from these funds, Powell has repeatedly deferred maintenance and operational adjustments.”
“What we know is that this revenue that is generated by this group of residents does not become a new pot of money for the city to spend,” Counts, the chairman of the Finance Committee, said. “What it does is it replaces revenue — about $2.17 million — from other residents who, under this proposal, will get a full credit for income taxes paid to their workplace communities. And the question is, ‘Is that fair?’
“Powell residents working outside of Powell, who pay 2 or more percent to their workplace community collectively pay $2.17 million in city income taxes to Powell,” he added. “This is more than the rest of the residents pay, which is about $1.57 million. It’s more than nonresident workers pay, which is about $1.65 million. And it’s more than what Powell businesses pay, which is only about $346,000. It is only with the lack of a full credit and the $2.17 million generated by it that Powell can provide the police and other services that Powell residents expect.”
Counts went on to say that his only conclusion is that the lack of a full credit to certain Powell residents has allowed Powell to subsidize its low income tax rate to many residents and nonresident workers. “Without the lack of a full credit to certain Powell residents, 0.75% does not work, and Powell can not provide essential city services, let alone to serve as a funding source to maintain its capital infrastructure,” Counts said.
Mayor Frank Bertone called the potential tax restructuring “one of the most critical components we need for our community to continue to grow.”
Councilman Brian Lorenz said putting the resolution into place now, rather than “kicking the can down the road,” gives the city its best chance to “succeed and get something that is fair and equitable to the voters.” He added, “As a fiscal conservative, I don’t look at this as a tax increase; I look at it as a reallocation of funds. And these are monies that need to stop leaving our community…”