WYSO

Will Higher Taxes Solve Springfield’s Problems?

Feb 5, 2018

In May, Springfield voters approved a temporary income-tax increase. It raises the city’s tax rate from 2% to 2.4% for a period of 5 and 1/2 years.

But that wasn’t the first time the city asked residents for more money. A tax hike was also on the ballot in November of 2016. At the time, Springfield City Manager Jim Bodenmiller told voters that he would have to cut city services if the increase wasn’t approved.

Voters approved the tax increase in May. It raises Springfield’s income tax from 2 percent to 2.4 percent.
Credit Cindy Funk / Flickr Creative Commons

He wasn’t bluffing. The tax increase failed in 2016, and the city started slashing services. 

“We had to close a fire station,” Bodenmiller says. “We had to close the police substation. We had to layoff some employees, on top of already having reduced 135 people over the last 10 or 12 years.”

After making those cuts, the city put a tax increase on the ballot again, just six months later. It passed, and the city started restoring and increasing services.

“We’ve since opened the police station back up. We’ve open the fire station back up. We’ve brought a couple of the employees back,” Bodenmiller says. “We’re in the process of hiring six additional police officers for the safe streets task force, and we told people we’re going to put $2 million a year in neighborhood streets.”

If that’s not enough good news, the city’s 2018 budget includes a surplus—something Springfield hasn’t had in eight years.

But if it sounds too good to be true, there’s a reason. This is a temporary fix, and in addition to the new tax rate, Springfield limits the amount of tax credit it gives to residents who pay income tax to other cities. That means even bigger tax bills for some people.

A Springfield resident who works in Dayton and pays income tax to Dayton could end up shelling out 3.7% of their income between both cities. And, of course, that’s in addition to state and federal taxes.

Attorney Dan Harkins worked with a group called Citizens for Responsible Springfield City Government to defeat the tax increase in 2016. Harkins says a higher tax rate isn’t a great selling point for potential residents: 

“The city, by increasing its tax rate and then also limiting the credit allowed for taxes paid to other municipalities, has rendered itself uncompetitive with respect to a demographic of younger individuals who might want to live here because the housing stock is less expensive, but from a cost perspective, it’s more expensive to live here.”

Like other cities in the Miami Valley, Springfield lost a lot of jobs during the Great Recession. New jobs have replaced many of the old ones, but they don’t pay as much. Instead of $20 or $25 an hour, some pay $10 or $12 an hour. At the same time, the population has been dwindling, and the state government has been giving Springfield significantly less money. And Bodenmiller notes that the city no longer gets estate tax, which brought in roughly a million dollars a year. Meanwhile, the city still provides most of its own services.

How would Harkins fix Springfield’s economic woes?  He points to neighboring states that have cut costs by merging services.

Harkins says “if you go to Lexington or Indianapolis, local government has been consolidated into a county-wide government. They have become much more competitive: They have lower taxes, more robust economic growth.”

In 2016, Springfield hired a consulting firm to look into the city’s finances. The firm suggested the city actively pursue cost cutting measures. Their ideas included things like moving the 911 call center out of the city government, finding contractors for income tax collection and code enforcement, and consolidating the municipal and commons pleas courts. Officials say that the courts are not interested in merging, but that the city is pursuing other suggestions in the report. 

Dan Martin was on the Springfield City Council for 20 years. He retired in December. Martin was for the tax increase. He says it was necessary to keep essential services in place, but he also says the city needs to be prepared for when the temporary tax increase runs out.

“We need to look at ways to consolidate and right size the operations of the city given that we were a city of 82,000 or 83,000, and now we’re a city of 59,000. It’s just not going to be sustainable to keep asking for additional taxes as a way to resolve some of those issues.”

Like Harkins, Martin points to Indiana and Kentucky as examples of places where consolidation of utilities and other services have helped cites with budget issues, and he urged the council to open those types of talks.

“Even if you’re not doing 100% full-bore metro-government, I think at the local level, the players have to be having a conversation—a heart to heart conversation—about what services we’re providing, who’s best equipped to provide them, and who’s able to do it at the most efficient cost.”

Right now, City Manager Jim Bodenmiller is focused on restoring essential services. He says that much of the city’s equipment is aging, and that it’s expensive to replace.

“A fire truck, a ladder truck, is a million dollars,” he says. “A medic unit? Sometimes two or three hundred thousand dollars. So, we’re bringing three brand new medic units in that we put on order, a new rescue truck, five police cruisers. We’re investing back in the city, just like we promised.”

Some of that new equipment will be leased instead of purchased, to cut maintenance costs, but the city will have to find other ways to reduce spending and create revenue. Otherwise, Springfield may be asking voters for more money again in five years.