At their meeting on April 21, Shelby City Council passed a first reading of two ordinances designed to bring the General Fund back to the black.
According to Councilwoman Pat Carlisle, chair of the Finance Committee, the General Fund remains in the red with a negative balance of $31,380. In addition, the Court Probation fund is again in the red with a negative balance of $2,855 and both the Police Pension and Fire Pension Funds remain historically and dangerously low.
“For the third consecutive month, General Fund expenses exceeded actual income,” said Carlisle. “What is happening in the General Fund affects the other three accounts as well.”
Two pieces of legislation came to council as a result of discussions in the Finance Committee as to how to put some sustainability into the General Fund. Ordinance 8-2014 proposes to change the percent of income tax receipts transferred to the Capital Improvement Fund, saving approximately $90,000 for only fiscal year 2014. Ordinance 9-2014 proposes a ballot issue for a permanent city income tax increase and a similar permanent residential tax credit starting in 2015.
Carlisle explained Ordinance 8-2014 suspends the five percent that is transferred from income tax receipts into the Capital Improvement Fund for only one year. She added Finance Director Bob Lafferty feels the ordinance is retroactive, meaning any money already transferred in 2013 can be taken from the Capital Improvement Fund back into the General Fund.
“I really am in agreement with five percent annually going into Capital Improvement, but it is one thing that serves as a stopgap for this one year since we are facing some serious issues in the General Fund,” said Carlisle.
Councilman Nathan Martin sponsored Ordinance 9-2014 to place on the November ballot the issue of whether to put in place a residency tax credit and an additional income tax. The ballot issue would increase the general income tax payable to the city by 0.5 percent. It would also create a residency credit of 0.5 percent for individuals and businesses within the city of Shelby. The actual tax increase for Shelby residents would be zero. Non-resident workers would pay, on average, $7.19 more per month to help ensure services to employers continue at the current rate.
Martin explained services the city provides to residents such as streets, infrastructure, police and fire are in large part to increase economic development.
“These services are a premium, and indeed our fire, police and utilities can and should be considered a Cadillac plan of coverage and assistance for area employers and also their employees,” said Martin. “But these services also come at a premium, and for those who benefit from the well-paying jobs in our community but who choose not to live within our community, we must ask them to carry their fair share of these premium services which result in their employment.”
Councilwoman Carlisle shared with council that approximately 5,828 jobs in the city of Shelby are held by non-residents, and stated the legislation is the same concept of Shelby citizens working elsewhere and being taxed by another entity. However, she expressed reservations regarding the logistics of the issue. She noted withholdings from residents and Shelby employees would later be issued as refunds, which would cost the city additional personnel come tax season.
“I’m not 100 percent sold yet; I want to make certain as we work through this we really consider the play out of this,” she said.
Councilmen Steve Schag and Harold Shasky both agreed to pass the ordinance for its first reading while also obtaining feedback from Shelby constituents and employers to understand how they might be impacted.
“I think we all heard the citizens speak at this council on their disfavor of the forgiveness tax being taken away from them,” said Shasky. “I think this is a good measure to look at and it deserves a first reading so we can get all the input on it and see where it goes from there.”
Martin announced he would be holding several town hall meetings to answer questions with the hope of gathering support for the ballot issue heading into November. His first town hall meeting is scheduled for April 28 at 7 p.m. at the VFW Post 291 located at 238 North Gamble Street in Shelby.
“There is no appetite by this council to increase the taxes on our residents, and by allowing this issue to go to the ballot we will give the option to our neighbors to help make the General Fund solvent long-term while also ensuring the taxes of our neighbors and businesses in Shelby are not raised one penny,” said Martin. “It is a win for our city, it is a win for our employers, and it is a win for their employees.”
