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The finance committee discussed the proposed 2024 budget and potential revenue sources in its meeting Tuesday.
While the city is projected to continue operating at a deficit of approximately $700,000 in 2024, the annual budget carryover is expected to see an increase from 2023. Auditor Betty Brothers said the city was currently on track for a carryover of approximately $1.4 million going into 2024 with payroll and income tax for November and December still to come, an increase from last year’s carryover of $1.1 million.
Brothers also explained that because the city budgets conservatively, and because the city budget includes the full proposed budgets of all the city’s department’s which “never spend their whole budget,” the city’s actual expenditures would likely be less than projected.
“When you look at the budget it’s kind of like a worst-case scenario,” said Brothers.
Brothers also noted that there was currently pending state legislation that could increase the percentage paid into employee pensions the city is obligated to match from 19.5% for police to 24%, and 14% for employees on OPERS to 18%. Brothers said this additional expense was not factored into the proposed budget as it was uncertain if the proposed changes would be approved
Councilman Jeff Stockman questioned what avenues the city might pursue to increase revenue to keep up with ongoing inflation issues, like potentially increasing the costs of license fees. Stockman stressed that while he was not suggesting the city take any such action at that time, he felt it was important the city consider its options.
“I’m by no means suggesting raising everything, I just want to know what’s possible,” Stockman.
Brothers said one avenue the city could pursue would be to increase the franchise fee charged to Spectrum. Brothers explained that currently the city charges 3%, which generates approximately $90,000 annually, but that the city could increase this to up to 5%. Brothers also said that the city could increase the cost of registering a vehicle. Brothers explained that the city currently assesses two levies on the registration of each vehicle, one of which is split with the county, and could add up to two more.
“When you register your vehicle, whatever you pay, there’s two levies on there that the city assesses, and one of them is split with the county, its $10 a piece these levies, so for every time you go register your vehicle the city receives $7.50. With that the city has the ability to charge two more levies at $5 a piece, so we could charge a total of $20, but one of them is split with the county,” said Brothers.
Brothers said that most surrounding communities charge either the full $20 allowable, or $15, and that were the city to decide to do so it would require council action. Brothers also explained that it was too late to do so for this year, and should council decide to do so for fiscal year 2025, council would need to approve legislation before July 1.
Councilman Jake Gano suggested the city review the its policy regarding income tax reciprocity for residents working outside of the city, under which resident who work in communities outside of Salem and pay income tax in the municipality in which they work are not charged additional city income tax. Gano argued the policy would more accurately be called a credit, since the city doesn’t actually receive anything in return, suggesting a reduced percentage of reciprocity could serve as a source of revenue for the city.
City Service Safety Director Joe Cappuzzello said that most cities within the area and in Ohio offer the same 100% reciprocity rate. Cappuzzello also explained that many areas such as Youngstown already charge a higher income tax rate than Salem so a reduced rate of reciprocity would not result in any change in most cases.
“Somewhere like Youngstown is 2.75%; if we only gave half credit that’s still over the 1%, we charge, so you would get full credit. So, if anybody had 2% income tax and we only gave them half credit that would still be full credit for the 1% we charge,” said Cappuzzello
Brothers also said that council had attempted to “do away with” reciprocity in the past, and a group of residents had come together and brought the matter to voters, who overturned the change, forcing the city to return the money collected.
The committee ultimately voted unanimously to forward the proposed budget to the city council for review.
The city council will meet next at 7 p.m. Dec. 5.