Westerville City Council Sends Income Tax Restructuring Plan for November Ballot
Voter Approval Necessary to Raise Revenues to Maintain Service Levels, Equalize Rate Paid Among Residents & Non-Residents
WESTERVILLE PRIDE
The City of Westerville enjoys excellent city services and public amenities providing an enviable quality of life that led Money magazine to name the city a Top 50 American town. Westerville also provides a strong climate for economic development attracting companies to locate and grow their businesses here. Instead of a bedroom community, Westerville is now known as a work destination.
Westerville’s vitality and desirability is not by happenstance according to city leaders. Rather, it is the result of ongoing long-range planning and budget-conscious decision-making by city council, as well as a commitment by every employee to provide citizens with the best safety forces, excellent parks and recreation opportunities, and the highest levels of every day city services.
THE NEED: AN EQUITABLE INCOME TAX RESTRUCTURING
However, maintaining Westerville’s long-term financial health and stability has become a greater challenge in recent years. Westerville’s income tax revenues account for nearly 60% of the City’s revenue stream, but the current income tax structure does not provide enough revenues to maintain our infrastructure and to provide the level of city services Westerville residents and businesses have come to expect. Aside from services, it has also been determined that an extra $4 million annual investment would be necessary to update all of the City’s current roads to a fair or better condition. This additional investment is not possible today because the City’s income tax rate for general services has not increased for 25 years, since 1983.
“We are now in a situation where your next door neighbors likely don’t pay the same income tax rate you pay,” added Fosselman. “Residents working in Westerville pay 1.25%, but most working residents work outside of Westerville and pay 2.3%. Additionally, non-residents coming to Westerville to work are paying Westerville 1.25% while most Westerville residents who work elsewhere are paying 2.0% to the communities where they work. What we need is a tax plan that not only maximizes revenue for our services and infrastructure maintenance but also fosters a more equitable tax environment for all involved.”
THE FIX…WITH VOTER APPROVAL
At its second meeting in June, City Council unanimously approved a plan that calls for an increase in Westerville’s income tax rate from 1.25% to 2.0%, which is the predominant central Ohio income tax rate. This plan must be approved by Westerville voters in November in order to take effect.
If approved, in conjunction with the rate change to 2.0%, the plan calls for a 100% income tax credit on taxes paid by Westerville residents who work outside of Westerville.
Currently, although Westerville’s 1.25% income tax rate is one of the lowest central Ohio rates, the effective income tax rate for approximately two out of every three residents is 2.30%, one of the highest effective rates in central Ohio. This occurs because residents who work elsewhere in a community with a 2% income tax rate must pay the community where they work 2.0% (of which Westerville receives nothing) and then also owe Westerville an additional 0.30%.
“During this unique time when we’re celebrating 150 years of incorporation as a community, we need to think about protecting our future,” said City Council Chairwoman Diane Fosselman. “Our past resident surveys speak to a high level of resident satisfaction with our service levels and our fiscal responsibility as city leaders. Our plan addresses the City’s needs, equalizes the rate for nearly everyone concerned, and ends up being a net tax decrease for a majority of our working residents.”
INCOME TAXES EXPLAINED: HOW WOULD YOU BE IMPACTED?
Residents who work elsewhere and currently pay an effective rate of 2.3% would see a net tax rate decrease to 2.0% because they would receive a 100% credit on their taxes paid to the communities where they work. Approximately two out of every three working residents are in this category.
Residents who work in Westerville would pay Westerville 2.0%. These residents currently pay 1.25%. Approximately one out of every three working residents is in this category.
Non-residents who come to Westerville to work would pay Westerville 2.0%. Currently, most non-residents pay 1.25% to Westerville and 0.75% to their home community for a total of 2.0% paid in local income taxes because the predominant central Ohio rate is 2.0%. Westerville can only charge non-residents 1.25% unless voters approve changing the tax rate to 2.0%. If this plan is approved by residents, non-residents would continue to pay a total of 2.0%, but all their local taxes paid would stay in Westerville, where their money is earned, instead of 0.75% of their taxes going back to their home communities due to Westerville’s lower rate. This would result in an $8 million revenue stream that could be devoted to city services and infrastructure repairs, without any increases to the rate that non-residents would pay.
Those on retired or fixed incomes would not be impacted at all financially by this plan. Even if approved, all Social Security, company pensions, dividends & interest income would continue to be exempt from the City’s income tax.
To calculate how the proposed income tax restructuring would impact your household: residents working outside of Westerville in a city with a 2.0% income tax rate (i.e, Columbus, Dublin, Worthington, New Albany, etc.) would save $3.00 annually for every $1,000 earned; residents who work in Westerville would pay an additional $7.50 per $1,000 earned.
With this plan, nearly all of our residents would pay the same local income tax rate of 2.0% no matter where they worked,” said Mayor Anne Gonzales. “Likewise, non-residents’ full 2.0% paid in local income taxes would stay here in Westerville for Westerville services. We also made sure that any changes to our rate restructuring proposal to the public won’t impact our retired population. Now, the issue is for the voters to decide.”
THIS ISSUE WILL DETERMINE OUR FUTURE
Any change to the income tax rate must be approved by voters. This solution would generate the revenues necessary to maintain our current level of services and address our infrastructure needs and create a more equitable environment for all Westerville working residents no matter where they work. Email questions to info@westerville.org or call 614-901-6411.