12-05-02: Celina income tax credit may end

12-05-02: Celina income tax credit may end

Councilors also look at lowering taxable age to 16 to raise revenue

By TIMOTHY COX
The Daily Standard

    Celina City Council will be asked to consider repealing the local municipal income tax credit and lowering the taxable age to 16 at Monday's regular council meeting.
    Celina city officials are looking at the options as a way to put off having to ask residents for an increase in the city income tax to help pay for strapped city services and as part of their ongoing review of the city's tax code.
    Council's personnel and finance committee made the two recommendations and a couple of others during a Wednesday evening meeting.
    Taking away the credit could mean an additional $400,000 in general fund revenue, officials said. But it also would mean that residents who live in Celina but work elsewhere would have to pay local income taxes in both towns. Most cities generally grant a credit that waives local taxes if income taxes were paid to another political subdivision.
    Greenville is the only city in the area that has gotten rid of the credit. A few other towns, such as Rockford and Delphos, have lowered the credit so local residents still must pay a portion of their local tax burden, even if they work in another town.
    Council member Collin Bryan said repealing the credit is something many cities are looking at doing. He predicted a "domino effect" of towns joining ranks after a couple lead the way.
    "Let's be at the head of the line," Bryan said.
    Council member Angie King said dropping the credit amounts to "double-dipping" by the city.
    Others, though, noted that city residents who live here but work elsewhere now enjoy the benefits of city services but pay no local income taxes to help fund them.
    Committee members voted to recommend that council amend the update of the tax code to repeal the tax credit effective April 1, 2003. By delaying the move through the first three months of the year, it essentially grants new taxpayers a 25 percent credit for the year, council members said.
    City officials also talked Wednesday and previously about seeking an increase in the city's 1 percent tax rate. Some said they believe dropping the credit would buy the city some time.
    Safety-Service Director Mike Sovinski estimated the change might stave off a tax hike for five years or so.
    City officials are poring over the tax code to squeeze every available dollar out of it to relieve budgetary pressures. They talked about, but made no decisions, on where any additional revenue should be applied.
    The city street department and parks department are the most cash-strapped, Mayor Paul Arnold and Sovinski said. For example, Sovinski has estimated the city should spend at least $350,000 annually on streets, but only a fraction of that amount was spent this year due to limited funding.
    "We desperately are looking for every way we can increase revenue in the city," council member Denny Smith said.
    Committee members also agreed to recommend that council lower the taxable age for city income tax from 18 to 16.
    King said she does not agree with taxing minors and said she has support within the community for her stance. But Bryan noted it now costs the city money to process tax returns for those under 18 and that children still are subject to state and federal taxes.
    In addition to the savings through processing tax returns, the city might generate $20,000 or so by taxing the younger crowd, officials said.
    Council member Sharon LaRue admitted she is "on the fence" on the issue but went along with committee members in a unanimous vote to send the issue to the full council.
    Committee members also recommended council act on a couple of other changes to the tax code. One is simply a wording change regarding corporations that does not affect taxability of any entity. The other expands existing tax laws to allow the city to go after management and fiscal agents of companies that fail to turn over tax collections withheld from employees to the city.
    Auditor Pat Smith said the changes might not ever result in the city collecting more tax revenue, but said it at least establishes a viable process for the city to act on.

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