Pandemic pinches Groveport’s income tax revenues

By Rick Palsgrove
Southeast Editor

The ongoing coronavirus pandemic has put a dent in the city of Groveport’s income tax revenues this year.

In his mid-year financial forecast (which is used to create a foundation for next year’s budget) Groveport Finance Director Jason Carr said it is still too early to determine the definitive impact the coronavirus will have on income tax collections, but revenues are smaller.

“We have experienced a reduction of income tax collections (including withholdings and net profits) since March 2020 through year to date,” wrote Carr. “With this unknown, but based on the assumption we will continue to collect at an amount lower than in 2019, we are reflecting a 10 to 15 percent reduction in expenditures in the 2021 budget. I believe this is a prudent approach to the 2021 budget.”

As part of the 2021 budget planning, Carr said normally 80 percent of the income tax allocation goes to the general fund with 10 percent to debt service and 10 percent to capital projects. For 2021, Carr recommends revising that to 85 percent to the general fund, 5 percent to debt service and 10 percent for capital projects.

“(This is) with the understanding the recreation center and potentially the golf course will need a larger transfer of funds from the general fund to account for lost revenue due to COVID-19,” wrote Carr.

According to Carr’s forecast, the recreation center’s projected operating losses for 2020-22 are estimated at $1.5 million, $1.2 million, and $1.1 million respectively due to “the struggle to re-open the recreation center to full capacity and operations based on the impact of COVID-19.”

Carr noted the Groveport Municipal Golf Course relies on transfers of funds from the general fund for capital improvements and due to increased operating costs.

In an interview following the Aug. 10 Groveport City Council meeting, Carr said that the warehouses in the city (which are large income tax revenue producers) are considered essential businesses during the pandemic, so worker income tax withholdings have been steady. However, he said the companies are not selling as much product, so the reduction in the city’s income tax revenues stem from the lower net profits the companies are receiving.

“If things turn around economically, we can adjust our 2021 budget accordingly,” said Carr.

Groveport Madison Schools is a large employer in the city and Carr said income tax revenues from worker withholdings from the school district are remaining steady because the school staffs have continued to work and be paid.

Income tax revenue history
City income tax revenues have risen steadily from $12.4 million in 2013 to $17.6 million in 2019.

Carr’s forecast projects income tax revenue estimates of $16.2 million in 2020, $15.6 in 2021, and $15.9 in 2022.

“Income tax revenues received are the largest and primary source of revenue for the city,” said Carr. “We must be diligent retaining and seeking new businesses to the city of Groveport. Many programs in the city are not self-fund supporting and rely on the general fund to supplement their operations. Although mandatory income tax filing has seen a small increase in collections, business employee withholding will continue to be the largest source of income tax collections.”

He noted that in 2019, 88.9 percent of general fund revenues came from income taxes.

Overall balances
Carr said projections show that the overall total fund balances are “expected to remain flat with expenditures outpacing revenues in 2021…It is expected total expenditures will outpace revenues beginning in 2022.”

According to the forecast, total estimated revenues in 2020 are $30.5 million with $28.3 in total estimated expenditures. In 2021 the total estimated revenues are $33.8 million with an estimated $32.8 in total expenditures. In 2022 the total estimated revenues are $31.1 million with total estimated expenditures of $31.3 million.

“This forecast projects year end balances and we can make budget plans around that,” said Carr.

Other funds
According to the forecast:

•By law, the city must allocate $150,000 yearly to the rainy day fund until its balance reaches $2 million.

•The debt service fund will remain flat as the recreation center bonds are retired in 2022 while debt service is incurred for improvements to the historic downtown area.

•The street maintenance and repair fund’s revenues historically do not fully cover operations. Therefore it is supplemented by transfers from the general fund by an estimated $675,000 in 2020 and a projected $550,000 in 2021.

The 2021 city budget
Groveport City Council, Mayor Lance Westcamp, and city administrative officials will begin the 2021 city budget process this full with expected approval of next year’s budget by November or December.

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