Proposed road improvements, such as widening State Route 256 to four lanes south of Diley Road, and the cost of maintaining a high level of police protection will stretch the city of Pickerington’s finances in the coming years.
Extra fuel charges on purchases, the inflated price of petroleum based road pavement, and a snow heavy winter have added to the financial strain. To recover, city officials are looking at all options to reduce expenditures and increase revenue.
"You wait for as long as you can (before asking for more money), but you have to look to the future," said Pickerington Finance Director Linda Fersch. "The economy is worse than it has been in 30 years – worse than after World War II."
To fund the Diley Road widening project, the city received a loan from the state that was interest free for the first year then charged at a rate of 3 percent every year after that. Because most loans have an interest rate closer to 6 percent, the city accepted the offer, Fersch said.
However, instead of a 25 year term like most of Pickerington’s other debts, the new loan has a 10 year term. The shorter term equates to higher payments. The city secured the loan by promising that if the general fund could no longer afford to make payments, other revenue sources would be tapped.
This year, the city began relying upon impact fees to cover the loan. Impact fees are collected from new businesses and residential developments for buildings and construction projects.
Different types of impact fees benefit various aspects of city government. For instance, the parks and recreation department used impact fees collected on its behalf to purchase a community pool.
The impact fees that Pickerington uses to cover the Diley Road loan were earmarked for road improvements. By the end of 2008, the city will drain the road impact fees yet will still need to make loan payments. Furthermore, funding will be limited for road improvements elsewhere in the city.
Pickerington chose to fund the Diley Road widening through loans rather than asking voters to approve a bond issue because the final cost of the project is uncertain. As many as three or four years after the road is completed, contractors may still bill for unexpected costs.
"All the planning and preparation in the world comes undone when you start digging dirt," Pickerington Mayor Mitch O’Brien said.
Diley Road may be particularly hard to judge because it rests on a peat bog. The soft peat causes the southern portion of the road to sink and flood and the northern portion to rise and fall in small hills.
So far the project has fallen below budget, however, if that changes, Pickerington will be responsible for 20 percent of any additional cost. The city would be unable to borrow more money from the state.
Although "Diley Road has stretched us thin," O’Brien said, the investment will benefit the city in the long run. He could not elaborate more than to say a large commercial entity is eager to develop along the corridor once the road is completed.
Money for police
Pickerington needs more money to fund its police department.
Currently city property owners pay a portion of their taxes to a 5.5 mill police levy, which effectively collects at a rate of 3.72 mills. Levies cannot collect more than their original goal, which in this case was $1 million.
As more people move into the city, the amount individual property owners pay toward the police levy decreases, however the need for police protection increases.
Pickerington allocates $1.8 million from its general fund to compensate for the difference between what the levy collects and what it costs to run the department. The general fund receives its money from income taxes.
"We allocate as much as possible to staff the police department to keep Pickerington safe," said O’Brien. "We cannot fall behind."
Dealing with debt
To deal with the impending debt payments while maintaining services, every city council member joined the finance committee. The committee also spawned two subcommittees – one to study expenses and the other to seek income.
The city’s budget never included any fat; therefore the focus of the expense committee is not to make cuts. Instead, the committee will evaluate all the departments to seek creative alternatives.
"We try to find good ways of saving money," Fersch said.
Since the beginning of the year, Pickerington officials have earned thousands of dollars by implementing change. For example, new LED traffic lights along State Route 256 cut the city’s electric bill by 43 percent in the first full month of operation, and with staff opting for new insurance plans including a health savings account, the city saved $200,000.
Pickerington’s recent high credit rating from Moody’s Investor Services helps it to receive better interest rates on loans. Consolidating loans has also helped the city.
Searching for revenue
The city will still need more income. The revenue committee continues to weigh the possibilities.
Asking voters to renew the police levy is one possibility, or voters may be asked to increase income taxes, or they may consider another course yet to be determined.
"It’s not a cut and dry thing," Fersch said.
Currently, the city collects a 1 percent income tax with only 0.5 percent charged to residents working outside Pickerington.
"This is a bedroom community with people working elsewhere," O’Brien said. "We try to help them out."
In other words, if you live in Pickerington but work in Columbus, you pay a total of 2.5 percent income tax – 0.5 percent to Pickerington and 2 percent to Columbus. However, Pickerington charges a 1 percent income tax to the 9,000 people who actually work in Pickerington, Fersch said.
If the city asks voters to increase the income tax, they will likely propose to only increase the "work tax." This would mean that if the Pickerington income tax increases from 1 percent to 1.5 percent, residents who work outside of the city would still only pay 0.5 percent to Pickerington. However, the people who work in Pickerington would see their income tax raise 0.5 percent.
A "work tax" would not affect senior citizens on fixed incomes, O’Brien said.
"Other communities around us have much higher work taxes," Fersch said. "Employees working in Pickerington get away with paying a much lower tax. "
Pickerington’s income tax has remained the same since 1976.