By DENISE GRANT
There is still no consensus between two of Findlay’s top elected officials as to whether the city’s practice of waiving estimated tax payments is good budget management.
Mayor Lydia Mihalik insists the city is better off to not count on estimated payments, because the estimates can be wrong.
Auditor Jim Staschiak says waiving the estimated payments complicates budgeting and makes it more difficult to develop reliable estimates.
Debate over the practice erupted again this week after Andrew Thomas, the city tax administrator, reported that city income tax collections were down in 2017 by about $1.8 million.
Income tax collections from businesses took the greatest fall, dropping 42 percent or $2.25 million to $3.1 million.
The decrease was partially offset by individual taxes and withholdings, which increased last year by 2.5 percent to $20.2 million.
In all, the city collected $23.3 million in income taxes in 2017, compared with about $25 million in 2016.
The city began 2017 with lower expectations for tax revenue: $24.1 million.
“It’s no great mystery as to why business income tax collections were lower in 2017,” said Mayor Mihalik. “If you take a look across industries, 2016, the year the collections were based on, wasn’t a very good year with that presidential election. Things were kind of stagnant. There wasn’t much growth.”
Findlay also entered 2017 with a deficit spending plan. City spending was expected to outpace revenue by about $1.2 million. Mihalik said all city departments were asked to work to keep spending down, and they did.
City departments returned nearly $1.7 million in appropriated, but unspent funds, in 2017. That was enough, Mihalik said, to overcome the deficit. While the numbers are not yet final, the city may have broken even or better last year.
“That’s how well we have managed our money. We did it, even with bringing in a million less than we thought we would. That’s why I keep saying major kudos to our city’s operations,” she said.
While the city may have budgeted its way out of red ink in 2017, Auditor Staschiak said it could have had more leeway.
Staschiak said Findlay’s collection of business income taxes is being “heavily influenced” by the practice of waiving estimated payments in the year they are due.
The auditor has said it’s logical to assume that if the practice had ended in 2017, the city may have experienced a windfall year.
The city tax department has reported that two individuals and 54 businesses were allowed to delay paying estimated tax installments, for a total of $1.08 million in payments, for tax year 2016.
However, Staschiak said that report, which was demanded by Findlay Council last year, only included hardship cases. He said city tax administrators have refused to include businesses that are considered non-hardship cases, arguing that the numbers alone would identify the taxpayer, which is prohibited by law.
So far, he said, city officials have ignored prompts by state auditors to develop procedures and policies for allowing the delay of estimated payments. As it stands, delays are at the sole discretion of the city tax administrator.
“What it basically boils down to is that I have to take the numbers reported by the city tax administrator with a grain of salt,” Staschiak said.
Staschiak said the practice further complicates budgeting and makes it more difficult to develop reliable estimates.
“No taxes are being deferred. Taxes are being paid on time,” even if estimated payments are delayed, Mihalik said.
She said estimated payments are just that, “estimates.”
And, Mihalik said, city officials should beware of “windfalls” in estimated taxes. In 2007, Findlay received just that, a windfall in estimated taxes.
“And the city took that money and spent it,” she said.
The estimate was wrong, and for the next two years, the city’s business tax collections bottomed out as adjustments were made to account for the overpayment.
She said the city tax administrator watches earnings, payments and collections, and knows how to avoid collecting overpayments.
“I’d argue that both the auditor and the tax administrator can make better projections without those estimated payments,” said Mihalik. “And there’s an argument to be made that if we had this tax practice in place in 2007, we wouldn’t have needed the additional one-quarter percent income tax in 2009.”
City residents approved an additional tax in 2009 for three years. An attempt to renew the tax was defeated.
As for the year ahead, city officials are anticipating a better collection year. A total of $24.6 million in income taxes is projected, with growth expected in all three categories of tax: employer withholdings, individual payments and business taxes.
Findlay Council has again approved a deficit spending plan for 2018, with spending estimated to outpace revenue by about $1.6 million.
General fund operating revenue for 2018 is expected to total $26.8 million. Operational spending for 2018 is expected to total $28.4 million.