’08 income tax revenue on par with ’07 in Warren
By Ed Runyan
WARREN — As it turns out, the bigger drop in Warren’s income tax revenue occurred in 2007, not in 2008.
When Mayor Michael O’Brien explained the reasons why the city was experiencing so many budgetary woes during the second half of last year, he pointed to the decrease in revenue from income taxes paid by employees at Delphi Packard Electric and other factories that have eliminated jobs in recent years.
He pointed out that Delphi was Warren’s largest source of income tax revenue in 2005 “by a long shot,” providing about $1.3 million, compared with about $180,000 in 2008.
But statistics released by the city in recent days show that income tax revenue in 2008 exceeded expectations, ending up at $18.7 million for the year, almost exactly the same amount as in 2007.
Tom Gaffney, city tax administrator, said one reason the income tax collections came in stronger than anticipated last year is because his department worked hard to collect as much as $200,000 in back income taxes.
The real drop in income tax revenue occurred in 2007, when it fell to $18.7 million from the 2006 figure of $20.7 million.
But the mayor says income tax collections rising $300,000 higher than estimated doesn’t mean the city miscalculated on how much to cut the 2009 budget, which slashed 40 jobs from the city’s payroll.
First of all, income tax accounts for 68 percent of the city’s revenue and doesn’t take into account the loss in areas such as inheritance taxes, which dropped by $250,000, he said.
Second, the more important figure for budgetary purposes is how much income tax revenue the city will receive this year, the mayor said.
“Our layoffs are based on 2009 [revenue],” O’Brien said.
Auditor David Griffing estimates 2009 income tax revenue to be $17.5 million, a drop of almost 7 percent from 2008, O’Brien and Griffing said.
Griffing said that estimate was based on an evaluation of the health of local employers and other issues that could affect the local economy.
For instance, it assumes there will be loss of revenue from temporary layoffs at the Severstal steel mill but a positive effect coming from Barack Obama’s taking office as president and stimulating the economy, Griffing said.
The city laid off 20 police officers, 11 firefighters and eight other city employees effective Jan. 1 as part of its $1.2 million in cuts to its 2009 budget compared with its 2008 budget of $28.7 million.
In all, the layoffs were made to eliminate $3.2 million — money needed to pay for the unemployment benefits, vacation and compensation time coming to the laid-off employees, plus an additional $800,000 required because 2009 has an additional pay period compared with 2008, Griffing said.
runyan@vindy.com