City News - UH,OH - 10/17/07 - Nearly 10% city tax increase proposed

(As published by Cortland Standard, Evan Geibel Reporting)

The proposed $16.8 million 2008 city budget, which would increase the tax rate 9.8 percent, was distributed to the Common Council at its meeting Tuesday night.

The tax rate would be about $17.99 for every $1,000 of assessed property value. The current tax rate is $16.37 for every $1,000 of assessed valuation.

The proposed $16.8 million in overall spending represents a 6.3 percent increase over this year’s $15.8 million budget.

The total tax levy, or amount to be raised by local property taxes, for 2008 would be $9.6 million, up from the $6.6 million 2007 tax levy.

In his budget report, Mayor Tom Gallagher recommended that the council adopt the budget as written — it includes no new programs to be funded and no capital equipment or vehicle purchases.

The spending increase is attributed to salary increases, which are up about 3 percent on average; escalating pension costs; increases in the cost of fuel and utilities; and a 13 percent increase in the cost of health insurance.

Gallagher said the city paid $258,000 for pension costs in 2003. In 2007, those costs had risen to about $1.2 million.

City Director of Administration and Finance Andy Damiano said that short of cutting personnel, there appears to be no feasible method of reducing the tax rate.

“This is, for all intents and purposes, just a sort of stagnant budget, other than costs that are entirely out of our control,” Damiano said this morning.

About 73 percent of each year’s budget is used for personnel expenses. Since the city is already operating at minimal staff levels, the mayor strongly discouraged the council from considering staff cuts.

“The only way to reduce manpower is for the city to reduce services. We have to find that fine balance, and I think we’re at it,” Damiano said.

The tax increase — the largest in recent memory — is due in part to the inability of the city to rely on surplus funds to offset the following year’s tax increase.

Bond balance

Over the last three years, the Common Council has been reducing its reliance on surplus funds to offset possible tax increases in response to a recommendation by the city’s bond rating service. Now, the city’s surplus has been drained and the council does not have a choice.

City Director of Administration and Finance Andy Damiano said he does not expect the rates at which the city pays back the debts it has incurred to skyrocket because of the lack of a surplus fund balance.

“On the one side, it’s not positive that we’ve pretty much wiped out the fund balance, but it is positive that we can demonstrate a reduced commitment to appropriating from the fund balance,” Damiano said this morning. “They might not be very happy about the one issue, but they would be happy with the other.”

And because the city has never operated at a deficit, the bond rating company, Moody’s, would likely look favorably upon sound management practices, Damiano said.

The bond rating is an important consideration since the city is considering major overhauls to the City Hall building, as well as the possible construction of a new multi-million dollar fire station, if not just an expensive overhaul of the Court Street fire station.

Damiano has said it is likely that any future bonding would be structured in a way that would not result in any tax increases — old debts would be paid off just as new debts were beginning to be incurred.

So my question as a City taxpayer is - how does the City revaluation play into the big tax increase we are facing? Is it "double dipping"? Please ask you Aldermen as they visit you during Election season - it may be two years until you see them again!