Finkbeiner proposes to raise taxes to balance the budget

Yesterday, Mayor Carty Finkbeiner made several suggestions to balance the city's budget.

I must admit to being confused about just how much is needed because the numbers coming from the administration change each time someone references the deficit. Last week, city council was told they needed another $8.1 million for 2008 - after closing out some Capital Improvement Projects to cover an $8 million hole.

Today, the mayor's power point presentation said $2 million was needed to close out 2008, but, despite having passed a balance 2009 budget, there is projected to be an $11-12 million hole yet this year.

According to today's paper,

Even though Mr. Finkbeiner proclaimed the city's budget as balanced, his plan only partially addresses an $8.1 million shortfall from 2008. Under the plan, the city will close the books on last year with about a $1.7 million deficit, which is in violation of the law.

I guess the 'bottom' line is that council still needs to find about $14 million in cuts between last year and this year.

So one of the ways Carty plans to cover that hole is by changing the way Toledo's payroll income tax is charged.

How it works:
The current rate of payroll income tax is 2-1/4%. A Toledoan who earns $50,000 owes the city $1,125 per year. Toledo has reciprocity on income taxes with surrounding communities.

If you live in Toledo, but work in another city, Toledo has allowed you to deduct whatever you pay in payroll tax to that other city from what you owe Toledo.

For instance, if you work in Maumee, you'd be paying them $750, so the only amount you would owe Toledo is $375 ($1,125 minus the $750). Under Carty's plan, you'd only be able to get credit for half the $750, so you'd now owe Toledo $750 ($1,125 minus $375).

If you work in Oregon, which has the same income tax rate as Toledo, you'd be paying them $1,125 and nothing to Toledo. Under Carty's plan, you'd get credit for half of that amount, which means you'd pay Oregon $1,125 and Toledo $750.

This is a tax increase for every person who decided to stay in Toledo even though they work in another city. Carty said this will raise $5.2 million per year.

I think it will make people want to move out of Toledo.

But that's not the only change he's suggesting.

On May 1, the garbage tax for people who recycle was supposed to go down from the $2 we're currently paying to the new rate of $1. He has proposed keeping the rate at $2 which will 'save' $175,000. Of course, it 'costs' citizens the same amount, but Carty seems to have a disconnect between the needs of the city versus the needs of the citizens.

A new fee he wants to create is a charge for Fire Department response to fires. He says that most insurance companies have a cost recovery provision of between $500 and $1,000. He plans to bill you and get that reimbursement from your insurance - the same way they bill for emergency response to a car accident.

Again, there is a disconnect. I think the mayor sees this as 'free' money to the city, failing to recognize that such public policies just end up raising the insurance rates of everyone in the area.

Carty does suggest some cost cutting: savings from the on-going contract negotiations with police unions, removing one fire engine from service, some layoffs for AFSCME Local 2058 - the supervisory union, going to four 9-hour work days for all exempt employees, automating garbage pickup.

But most of these cuts are across-the-board types of things. He has not, as far as I can ascertain, gone through an overall evaluation of current city services in order to eliminate the ones that are not mandated in the charter. According to the budget passed by council for 2009, we still have a youth commission, which might be nice, but is certainly not necessary.

So, the approach is to raise taxes. From all components of the plan he presented, the most money is generated by the change in income taxes - $5.2 million. Even Republican Councilman George Sarantou, who admitted the change may make some people want to leave Toledo, said he believes people realize the city's need for the funds. He has previously bragged about how much they've cut out of the budget over the past several years.

And Carty said the same thing during his presentation. One power point slide claimed:

"Over the past two years this administration has cut $25 million from the budget. This combined with the estimated $14 million we are cutting today equals $39 million, which is 15.6% of the total general fund budget."

Now, I didn't think this seemed accurate, so I used the link on the left to view the city's budget. Here's what I found for the General Fund expenditures:

2006: $234,312,215.50 (actual spent)
2007: $242,752,864.71 (actual spent)
2008: $254,098,779.08 (estimated - still don't have final numbers)
2009: $249,369,853.02 (approved by council)

According to these figures, spending from the General Fund has increased - not been reduced. I can only surmise that the 'cuts' being referred to aren't really cuts in spending, but 'cuts' in the amount of increase - kind of what Washington does...

Now, there is a decrease of $4,728,926.06 between 2008 and 2009 - and the mayor did propose more cuts totaling $10.3 million. It would be fair to say that if the mayor's cuts are approved, combined with the approved budget, there is a $15 million cut between last year and this year, if last year's spending was close to what was estimated.

But that's not $25 million over the last two years.

Regardless, the problem continues to be spending. The solution isn't to 'inflate revenue assumptions' or raise fees. The solution is to cut the budget of unnecessary expenditures, eliminate departments, boards and commissions that cost money but have no real purpose or enforcement, and develop a business-friendly environment by not taking over private business functions that, despite claims, really don't generate revenue.