'Between a rock and a hard place': Bucyrus officials considering ways to raise revenue
With costs rising and tax revenues dwindling, Bucyrus leaders have been exploring options for bringing more revenue into city coffers.
"It's all still in discussion," City Auditor Joyce Schifer said. "We're looking at various ways to raise money and there's been no decision made on anything yet. And whatever we do really won't help us until 2024."
The city has lost two major employers in a little more than a year. A change in state law resulted in an unusually high amount of tax refunds this spring. At the same time, Bucyrus City Council has dealt with price increases across the board.
And Schifer, after 23 years as city auditor (and eight years as treasurer before that), has announced she plans to retire at the end of the year.
"We're kind of between a rock and a hard place to be able to move forward and function. And the last thing I want is for me to retire and then the city just went into fiscal emergency," she said, laughing. "Not that I'm keeping it from happening. It's just there's too many factors when we're trying to satisfy three unions with raises and benefits and that kind of thing and we're juggling health insurance costs, which have jumped about $600,000 a year since 2016 — and that's just the city's share of insurance. We pay 85% of the insurance premium. It goes back to history again. When I first started as auditor, the city spent $500,000 a year in health insurance premiums. Now, our new projection for 2023 is $1.9 million."
What else is causing the Bucyrus budget crunch?
Budgets are tight everywhere. But for Bucyrus, the economic pressures faced by all cities and citizens alike come just as it's facing some major hits to city revenue.
"There are a lot of moving parts, and people just don't understand that," Schifer said. "They think it's just cut and dried and you can just give them an answer. That's not the case."
Bucyrus Precision Tech Inc. closed in the summer of 2021, eliminating more than 100 jobs. GE Lighting, a Savant Company, has announced it will close its Bucyrus lamp plant at the end of this month, eliminating about 174 jobs.
"We lost BPT. We're losing GE. We're looking ahead," Schifer said. "Just our tax withholdings from GE — we never got corporate taxes per se — but the withholding for the employees out there means a loss of about $300,000. We don't have anywhere to pick that up from."
For the 2021 tax year, the state revised its rules on how income earned by people working from home is taxed. Previously, those stay-at-home workers continued to pay taxes to the municipality where their jobs were based. Now, they don't have to.
For Bucyrus, that change resulted in more than $250,000 in tax refunds, Schifer said. That's a hit of $125,000 to the city's general fund and $50,000 to the safety forces levy. "It's significant."
"It's only the right thing to do," said Kelly Schimpf, assistant income tax administrator for the city. "City taxes are based on you pay where you work first, so if they're not technically working in the city, then really they shouldn't be paying the city. We understood the state's decision to do that. It was painful, though, writing all those refunds."
Labor negotiations with the city's three unions have "dragged on since the first of the year, because they want more money," Schifer said. "Cops are losing people to other places that can afford to pay them more. We just don't have the tax base that we used to have."
Some city employees are participating in a Deferred Retirement Option Plan, or DROP. According to Investopedia.com, DROP plans allow employees eligible for retirement to keep working. Rather than having the additional years of service factored into retirement benefit calculations, "the employer places a lump sum of money into a separate account for each year the employee remains on the job," according to the website. The employee is paid that lump sum, plus interest, upon retirement.
In Bucyrus, police officers and firefighters who are eligible to retire can participate in a DROP for up to five years, Schifer explained.
"And we've got officers down there that are either in it or thinking about getting in it, and with society today and all the violence and everything going on, police are jumping out of the force everywhere," she said. "And many times, they can make more working security for a private company than they can working as a police officer and don't have near the danger."
At a special meeting of the Bucyrus City Council Finance Committee on Aug. 9, Mayor Jeff Reser said city officials have been able to negotiate lower DROP payouts, but workers who already had enrolled in the program were grandfathered in at the old rates, according to meeting minutes.
In all, Reser told committee members, tax revenue for 2022 is expected to be about $200,000 less than 2021.
Schifer said as of the end of August, revenue is down 4% year to date from 2021.
"It's been staying pretty flat," she said. "We are going to be down — it might just be 3%, if we're lucky, 2% at the end of the year. But it will be down from last year."
Auditor: 'Temporary money' no solution for Bucyrus
Federal and state grant money the city has received in the wake of the COVID-19 pandemic has helped, but it can be used only in specified ways. It's no solution to the problems facing the city, Schifer explained.
"There's more pressure on the federal funds that they give us because it only can be used for certain ways, so we can't necessarily just fix it with this temporary money. Like I say, it's not sustainable down the road," she said. "And it looks like, 'Oh yeah, we have all this money.' People don't understand that just because the bottom line of all our funds says we have $13 million, an awful lot of that is in enterprise funds that have to sustain themselves and pay for expanded water lines and sewer lines and garbage trucks and all that stuff. And that can't be used for raises in police and fire, things like that. So our general fund is the big issue."
For example, the Bucyrus Police Department was awarded $445,947.10 through the Ohio Violent Crime Reduction Grant Program for retention bonuses to aid in retaining current staffing levels for 20 officers, according to recent reports.
"Yes, we're getting grants for this and that, but that's all short-term stuff," Schifer said. "You might be able to put a Band-Aid on something now, do retention bonuses, or do this or that, but how do you sustain that down the road? And that's what we're trying to do."
What solutions are Bucyrus leaders considering?
At a March meeting, Dan Wirebaugh, finance committee chairman, said he supported annexation as a way of bringing more money into city coffers.
There are several businesses on the outskirts of town, particularly on East Mansfield Street, that have never been annexed into the city. "They want services, but they don’t want to annex," Schifer said.
"But there's hoops to jump through on that and that's going to take some time," she said, adding it would "help a little bit with revenue."
Bringing in new businesses to expand the tax base is always a goal. "Now we've got some things in the works, but it's not another GE," Schifer said.
The income tax credit
One solution would be reducing or eliminating the city's income tax credit for residents who work in other communities.
Reser first suggested the possibility during his State of the City speech in March. Currently, Bucyrus gives 100% credit for residents who pay income tax of up to 2% in another community where they work.
Not all communities are so generous, he said, noting many surrounding communities forgive only a portion of those taxes.
After residents angered by the proposal spoke out at several council meetings, council members dropped the idea.
Schimpf said she believes residents mistakenly thought Reser intended to eliminate the entire credit.
"And he can't even do that," she said. "Council would need to approve any reduction in the tax credit. I think they were afraid that he was requesting that the whole credit be erased. And that would scare me. There was never a mention on the percentage reduction, whether it be a quarter or a half."
"People just panicked," Schifer agreed. "I think he was trying to get across that it was up to council to make the decision. He was just bringing it up to try to get people to think about it, start the conversation, and it just backfired. I think once he said something about the reduction, no one heard the rest of what he said. They just panicked."
At recent meetings, council members have revived the discussion.
"To be fully transparent, for lack of a better word, yes we are discussing the tax credit again," Wirebaugh said at an August meeting. "We are discussing it because the mayor, he had a very valid point; everybody knows things are costing more."
How much would a credit reduction generate?
One difficulty in deciding whether to reduce the income tax credit — and by how much — is that there's no simple way to calculate how much a reduction would generate, Schifer said.
"We can't give an exact number because almost every return is unique," she said. Some couples both work in town. In some cases, one spouse works out of town but the other works in the city. Or sometimes one works out of town, but doesn't pay income tax to another city, and therefore pays Bucyrus. "That's not going to change how much they're paying now; it will be the same. But every return is a little different, and without going through 6,000 returns, you can't put a number to it. It's guesstimates."
Schimpf said she'd be willing to take on the task.
"It's not just a computer-generated thing. ... You'd have to take a look at each and every individual return because it's all different," she said. On top of that, things shift from year to year as taxpayers' workplaces change.
"I mean, we have people who come in with six or seven W-2s. All these different places, different cities, with different tax rates. Which is why you have to look at every return," Schifer said.
Even deciding which year's returns to review presents a challenge. People who filed an extension for the 2021 tax year may not have filed yet, and the pandemic of 2020 affected many households' income.
Ontario, in Richland County, instituted a credit reduction after its GM plant closed its plant in 2010, Schifer said — although that community still had a big retail tax base.
"But that's why cities do it, because people don't want to pass a levy, and you just get to a point where you have to do something," she said.
Going to voters is another option being discussed by city council members.
"We have just been throwing around ideas on that and I just want to be, like I said, transparent, and let everyone know that we are looking for ways to increase our revenue, but we may all have to bite the bullet a little bit here," Wirebaugh said at an August meeting.
"They haven’t made any determination on anything," Schifer said. "They’re trying to look at all options ... They’ve talked about putting on a property tax levy for safety forces, because that’s where a majority of the money goes."
Roughly 84% of the city's general fund money goes to safety forces, she said.
What happens when Schifer retires?
Schifer said if council approves of the plan, she would like to hire someone as an assistant before the end of the year to give them time to learn the ropes before she retires. Anyone interested should pick up an application at the mayor's office.
It will be up to the Republican Central Committee to select an official replacement after she retires.
Finding someone to step into her role has been more of a challenge than she expected, Schifer admitted. She said there were a few people she thought would be interested in the post, but they all told her they had changed their minds.
"I may have to appoint one of the girls to be a deputy to be able to sign; I don't know. ... I've never retired before," she said.
But she wants to see the city on a solid footing before she leaves.
"We'll probably make it through this year OK," Schifer said. "And if they do the credit reduction, it will be effective for tax year '23, which we won't see any benefit of until '24. So we're trying to look out to the future so the city doesn't end up in fiscal emergency."
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This article originally appeared on Bucyrus Telegraph-Forum: Bucyrus officials consider ways to raise revenue as costs increase
