City of Lyndhurst, Ohio Finance Committee
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October 1, 2012: Finance Committee

The Finance Committee will meet on Monday, October 1, 2012 at 7:15 P.M. to discuss the income tax credit.
Patrick A. Ward, Chairman
Finance Committee
October 1, 2012: Finance Committee

The Finance Committee met Monday, October 1, 2012 at 7:15 p.m. Present were Council members Frey, Gambatese, LoPresti, Marko, Packard, Schlessel and Ward. Also present were, Mayor Cicero, Finance Director Kovalchik and Chief Porrello. The purpose of the meeting was to discuss how the Committee wished to approach the discussion on the topic of the Income Tax Credit.
Chairman Ward indicated the many ways the Council, Administration and employees have stepped up to the challenges brought forth by the economy in general and the lower property tax valuations specifically. He stated that the State's actions with regard to cutting Local Government Assistance as well as eliminating the Estate Tax have created another challenge that will severely impact Lyndhurst and all cities across the State. That impact, when added to the funds the States has also withheld from our School Districts, is pushing an unreasonable burden upon local taxpayers. Essentially the State has balanced its budget and bolstered its $860+ million "Rainy Day Fund" by keeping more of our local tax dollars for themselves and ignoring the needs of local government that is directly serving residents and local schools that are trying to prepare our youth for the future.
With the possibility of any development on Acacia Country Club land off the table there is no foreseeable relief for the City of Lyndhurst or the SEL Schools from enhanced property values or income taxes that would have occurred with development - which means there is no relief for the Lyndhurst taxpayer in this regard. For the City, one option on the table is to consider reducing or eliminating the Income Tax Credit. Mr. Ward asked the Committee Members what information they might need to see in order to assist them in this discussion.
Mr. Marko asked about another item that has surfaced in discussions at the State level regarding the "Income Tax Uniformity Issue" which would further decimate local governments across the State. The topic has been traveling the halls of the Ohio House - although many of our Representatives seem oblivious to it - and essentially is a concept that would look to either enable a uniform reporting format for employers across the state or would somehow make local income tax uniform across the state; the exact purpose of the discussions are unclear. Mayor Cicero participates on a Task Force, as part of the Mayors and City Managers Association, which is attempting to assure our representatives are aware of the impacts local governments will face at the hands of another irresponsible change. Mr. Ward added; "the local tax rates and local tax credits have been adopted by local voters in processes prescribed by State Law which the State now wants to somehow circumvent??? It is a concept that makes no sense." Mrs. Kovalchik indicated that the CPA's were also promoting the changes because the current tax laws and rates make it "difficult for them to follow". She further stated the impact of those changes is unknown because the Representatives don't know what the changes might even be.
Mr. Frey asked if it would be possible to see the loss of estate tax and Local Government Assistance against a proposed budget. Mr. Ward indicated that would certainly be possible but would not be as definitive as it would be after the end of the year when we know exactly how much money we are carrying forward. Mr. Frey further asked if the Committee members could be provided a link to a chart showing the tax rates and credits across the area which Mrs. Kovalchik said she would forward.
Mr. Gambatese asked what other options there might be to cut expenditures stating that not enough had been done and options had not been fully explored or followed through on. Mr. Ward indicated Council had done its due diligence on every suggestion brought forward and had either made those changes or dismissed them as was Council's wish at the time. Mr. Ward reminded the Committee members that Council's role was to provide the Administration with the direction and funding necessary in order to provide the programs and services that Council deems appropriate for our residents. Once that program description and funding is in place then, and only then, may the Administration move forward with its charge to implement those programs, staff and equip them as needed. In the past several years Council has made numerous choices that have trimmed, modified or suspended programs in response to financial realities. Council has also reinstated programs because acute need has been demonstrated as well. Mr. Ward cited the Sidewalk and Tree programs as examples.
Mr. Gambatese referenced the Estate Tax impact and indicated "we knew this was coming for two years". Mr. Ward responded that "we have never used aggressive estate tax numbers in our budget discussions since the estate tax revenue was always an unpredictable figure. Mrs. Kovalchik has only ever presented Council with a conservative figure for those budget discussions - numbers generally representing what was already known to be available to be advanced to Lyndhurst by the County". While Estate Tax has helped bolster the City's carry-forward end of year balance it has not been an optimistic component of the budget process, however, those funds have helped keep us afloat against the other economic challenges we have been faced with. If we had not been making the tough choices, changes and decisions all along we would have been forced to have this tax discussion a very long time ago and for much different reasons than to step up to the mandates being meted down by state government.
Mr. Gambatese also asked about re-opening contract negotiations to cut wages. Mr. Schlessel responded contracts had just been signed with all of the employee groups for three years. Mr. Ward added that the employees played a huge role in helping the City step up to the economic challenges when they extended their contracts for two years without changes or increases. Their willingness to work with the City for the sake of the organization's well-being, along with all of the other initiatives the City Administration and Council have put forth have helped the City's financial position and have given all of us a great deal of credibility with the residents.
Mr. Schlessel pointed out that 87% of the City's budget is made up of personnel costs which only leaves 13% being spent on paper clips and such. Since we have already found - and continue to look for daily - just about every economy possible on our "paper clip" expenses any changes we would need to make, in order to fill the hole the State is creating for us will mean seriously cutting services or programs. Putting it bluntly, he asked and repeated several times, "who do you want to lay off?".
Mayor Cicero indicated the Committee was spending an extreme amount of time addressing matters that had long been put to rest and should not be focused on the questions or comments of one member but should be affording time to all present to put constructive ideas on the table. Mr. LoPresti felt that the Administration and Council had been diligent in their efforts to maintain the high level of service that we desire for the least amount possible.
Following some additional comments Finance Director Kovalchik indicated very strongly that "time is of the essence in this matter". She was asked to gather additional information to assist the Committee members in their further discussion of the Tax Credit issue. The Committee will reconvene with that information in hand to discuss the matter further in an effort to come to some consensus so that legislation can be put forward.
The Finance Committee will convene at a later date to consider the tax credit question. With no further business to discuss, the meeting adjourned at 8:00 p.m.
Respectfully Submitted,
Patrick A. Ward. Chairman

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