Wade’s income tax hike in City Politics
It was the worst of times.
The Great Recession hit T-Town especially hard. Major employers were idled, lending was frozen, foreclosures were on the rise. The great unwashed masses of Toledoans were economically strapped, and it was trending downward.
It was the late twenty aughts, and the immediate future was indeed bleak. Yet He Who Shall Not Be Named, then-Mayor of Toledo, painted a rosy picture in his proposed budget for twenty oh-nine. Although the local economy was collapsing, he proposed a budget that projected income tax collections would only be slightly down from oh-eight.
A less-than-diligent City Council passed the budget almost immediately, only to discover-Shocked! Shocked we say!-that the budget was a complete disaster. Revenue for the City was in free fall, and could not possibly keep up with expenses.
While He Who Shall Not Be Named proposed drastic measures to save the day, and cast blame everywhere but on his own fool self, a solution was finally offered. By ordinance, only a certain percentage of income tax revenue can be used for the annual general fund. The remainder must go to capital improvement projects, which means projects with an intended life of more than five years.
What if the voters would allow a change, such that more of the capital improvement monies could be used to balance the general fund budget? It would mean delaying purchase of new vehicles, deferred maintenance on city properties, and reducing money available for road repair. But it would also stave off possible bankruptcy.
The voters saw the prudence of this short term solution. After all, it was a shift of dollars the City already had in the coffers, just re-orienting where they could be spent. And so began the now legendary transfer of capital improvement dollars to balance the general fund.
Bad credit? No credit? No problem!
It is now a decade later. Tax collections are at an all time high, with an increase of tens of millions of dollars since the bottom dropped out. Not long ago, the PHH administration had seen its way clear to eliminate the transfer altogether. Which makes sense, given the fact that it was intended as an emergency fix when revenue projections tanked and could not keep up with expenses. Now that revenues have rebounded, there should no longer be a need to transfer money from the capital improvement fund. Right?
Nah. That would assume expenses hadn’t also skyrocketed and continued to outpace revenues. Which is exactly what has happened under the Wade admin. Wader has allowed expenses to balloon, and has continued to transfer money from capital improvement to make up the shortfall.
Never fear, though, he has a solution. What do you do when your credit limit has maxed out? Be more frugal? Limit your spending?
Nope. You increase your credit limit and spend, spend, spend!
Wade is now asking voters to approve an increase in the City’s income tax rate, so the City can raise even more money and stop the transfer. He says it will allow for the capital improvement funds to be spent on roads, like they are intended. While also raising additional money to hire more police and fire fighters. And some money may be siphoned off to fund some as-yet-to-be-fully-defined attempt at universal pre-K.
Here are some unanswered questions. Most of T-Town’s infrastructure is very old and will require complete rebuilding, not just resurfacing. Rebuilds are very expensive, typically requiring long-term bonds, encumbering the City with decades worth of debt. In fact, most of the capital improvement funds go to debt service from past projects. In the mid- and long-term, what amount of the new capital improvement revenue will simply be sucked up in debt servicing as opposed to actual new road repair and rebuilding? Will roads be rebuilt, or just slap dashed with a new coat of asphalt? Will the capital improvement funds go to roads, or other non-road projects?
Much more of any new tax revenue will be dedicated to the general fund. How will those funds be dedicated? New police and fire classes mean a ballooning personnel budget. Won’t the new revenue be sucked up almost immediately, putting the City at financial risk from the next inevitable economic downturn?
As for universal pre-K, how much of the new funds will be used? How will this drain of resources be controlled? Is it a transfer of public funds for private use? And what assurance do City taxpayers have that such efforts will have any meaningful impact?
Bottom line. The City’s fiscal house is not in order. When your credit is maxed out, your first move is supposed to be to get your budget balanced, not to raise your credit limit. Why should voters approve giving the City more money before being assured it will be spent prudently?
That’s the question that needs to be answered before we go to the polls in March.