SHELBY, Ohio – After weeks of debate and deep thought, Shelby City Council passed an ordinance Monday night that will reduce the tax credit allowed for income tax paid to other municipalities.
With the passage of Ordinance 22-2014, Shelby residents who work outside the city will now receive a 67 percent tax credit on the base 1 percent income tax that was first established in 1972. Shelby residents who live and work inside the city of Shelby as well as non-residents employed in Shelby pay the city’s full income tax rate of 1.5 percent. The 67 percent tax credit is a reduction of the previous 100 percent credit, and will be in place for the year 2015 and forward.
“I guarantee this is the hardest vote I will ever cast, but I think it’s the responsible thing to do at this time,” said Councilmember/Mayor-elect Steve Schag. “We’re hoping to bring businesses into Shelby and increase our revenues, and one day we’ll take another look at this and be able to do something about it.”
In real dollars, Councilmember Pat Carlisle determined that a Shelby resident working outside the city and earning $36,000 per year would have been forgiven the full $360 of their one-percent income tax under the previous law. With the new 67 percent forgiveness, that Shelby resident would have a forgiveness of $241.20 per year and pay $118.80 in taxes. This equates to $9.90 per month, or 33 cents per day.
The passage of the ordinance comes as part of a package proposed by Finance Director Bob Lafferty. By changing the tax credit to 67 percent and making the change permanent, Lafferty agreed to transfer $250,000 into the General Fund from the 602 Light Debt Reserve Fund. This transfer will take place via legislation in 2015 after a resolution declaring the necessity.
According to Lafferty’s package, the tax credit will be restored back to 100 percent if any of the following options occur: local government funds are restored to their original level of $317,000 annually, the electorate passes a General Fund tax levy for a term of a least five years, or the General Fund reaches a $500,000 fund balance at the end of any given year.
Currently the General Fund has a cash balance of $217,191 with encumbrances of $92,730.
“At the last council, I mentioned that we needed to look at a larger and more comprehensive plan to our financial and fiscal situation than just this one piece of legislation, and I sincerely appreciate Mr. Lafferty taking that to heart and coming up with a comprehensive plan that doesn’t just address one area or the other, said Councilmember Nathan Martin.
“It involves several different pieces, from this tax forgiveness to actual budget cuts to also transferring money from our more established funds to the General Fund, which was a change in mind from Mr. Lafferty’s previous position.”
Ordinance 22-2014 passed its first reading 4-1 on Nov. 17 with only Councilmember Garland Gates voting no, and its second reading passed 3-2 on Dec. 1 with Councilmembers Harold Shasky and Nathan Martin voting no. On Monday evening, Councilmembers Schag, Martin, Gates and Carlisle voted yes to pass the ordinance. Councilmember Harold Shasky was not present at Monday’s meeting.
“I have been opposed to this from the very beginning, but I’m not one to be difficult, sit in the corner and point and expect other people to do the hard work and not appreciate that work,” said Martin. “I appreciate Mr. Lafferty and what he’s brought to us, and I especially appreciate that we’re going to look at repealing this ordinance to go back to our 100 percent credit of one percent. While the language says ‘permanent,’ definitely in my mind it’s not. If we don’t need to have this at 67 percent and we can afford to be at 100 percent, that’s exactly where we’ll be.”
Not everyone present at Monday evening’s council meeting agreed with passing the ordinance. During a Committee of the Whole session within council on Monday, Shelby resident Christopher Colyer declared that he was against reducing the tax credit.
“Personally, I work out of town and live here – I see it as a double tax,” said Colyer to members of council. “You should take into [account] what your constituents put you there for. It shouldn’t be voted upon by your beliefs and agendas, but the people who sit in your ward. It’s their money. And to keep voting on legislation to up the taxes, it’s like a broken record. It gets old after a while.”
Colyer, who has been a resident of Shelby for 30 years, described reducing the tax credit as “holding people hostages to their own homes” and said people would find it “disheartening.”
“Our issues we’re dealing with in this city are no different than any other city; we’re like any other small community,” he said. “I think sometimes things aren’t thoroughly thought out, and I think with this issue right here it is not being done.”
Shelby Mayor Marilyn John – sitting at her last council meeting on Monday – said she feels confident about the financial decisions being made in the city.
“These are just some bumps in the road that need to be addressed, however, a bump in the road does not mean that you’ve stopped and turned around and gone the opposite direction,” said John. “We are still moving forward, and moving forward in a positive manner. I feel good about the decisions that we’ve made.”
“I think everyone in this room knows that in 2015 anything we do to enhance revenues is going to have to be counterbalanced by looking for as many ways to cut expenses in 2015 as possible,” said Schag, who will be sworn in as Shelby’s new mayor on Dec. 31.
“We’re going to have to turn over every rock and find reasonable cuts to have a government that is efficient and sufficient. It’s not doom and gloom here. Elected officials, citizens and employees can all pull together, and that’s why we’re trying to enlist the help of our fellow citizens at this time to help us bring the city back to a position of strength of finances.”
“I think everyone in this room knows that in 2015 anything we do to enhance revenues is going to have to be counterbalanced by looking for as many ways to cut expenses in 2015 as possible,” said Steve Schag, who will be sworn in as Shelby’s new mayor on Dec. 31.
