Income tax split being discussed in Salem
Would send more revenue toward General Fund to help defer COVID?effects
SALEM – The Finance Committee of city council is considering whether to change the income tax split so that more money goes into the general fund instead of capital, retroactive to July 1.
Currently, the split is 82.5/17.5, which means after the amount for the income tax department comes off the top, 82.5 percent of the income tax receipts go to the general fund, with 17.5 percent going to debt retirement and capital improvements.
The request is to change the split to 90/10, or 90 percent to general fund and 10 percent to debt retirement and capital improvements due to income tax receipts being down, to ensure departments in the general fund have enough to operate. The general fund covers both police and fire departments, the auditor’s office, mayor’s office, administration, planning and zoning and council operations.
Mayor John Berlin told Finance Committee members last week that the income tax receipts are down $600,000 from where they would be if COVID-19 had not taken place. With so many people off work and businesses shut down at the beginning and the tax filing deadline extended to Wednesday, the receipts are down.
He didn’t ask for a decision immediately and suggested having another meeting on July 21, just prior to the next council meeting. By then, he said they should have a better idea of the tax income since that will fall after the filing deadline for income tax returns. He wanted to bring it up so they can get their questions out there.
Councilman Sal Salvino, a member of the Finance Committee, confirmed that this was a “just in case” move, a precautionary measure to cover payrolls if necessary. Or any other expense already appropriated in the general fund, the mayor said.
The hope would be that the cash carryover of $1.5 million wouldn’t get used up because the auditor needs at least $750,000 of that to start the next year.
Councilman Roy Paparodis, also a member of the committee, asked if the split would go back to the current level after this year or whether it would be reviewed again. Berlin said the split will need to be reviewed. So there’s no payroll protection plan for cities, Paparodis asked. The answer was no.
The city received $135,512 in funds from the CARES Act related to the coronavirus, but it can only be used to reimburse for expenses related to COVID-19, such as the cost of personal protective equipment, cleaning costs or anything done because of the coronavirus. The committee appropriated the CARES Act money into a line item fund for COVID-19 expenses.
City Auditor Betty Brothers said the question for next year will be the effect on the budget and how to predict the numbers. She said she believes the pandemic will have an effect on next year’s taxes, too, since taxes are a year behind. The loss in income for people will be noticed when they file next year’s return. The effect this year is from tax withholding from paychecks and from the late filing deadline.
“We’ll need to watch even more diligently,” she said.
A lot of businesses are going to central collection through Columbus, so there’s a timing issue, too, of when the city receives money from businesses.
The issue will be discussed again when the Finance Committee meets at 6:45 p.m. July 21.
“Thank you for being proactive on this,” Councilman Andrew Null said to Berlin and Brothers.
Null chairs the Finance Committee.
In other business, a tax budget hearing was held prior to the last council meeting and then council approved the 2021 tax budget that has to be sent to the Columbiana County Auditor’s office. The city’s actual budget for next year won’t be done until late in the year.