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Youngstown’s 2014 income and business tax collection is $523K short of its projection
YOUNGSTOWN
Youngstown ended 2014 with $523,300 less in income-tax and business-profit-tax collections than budgeted, and city finance officials expect 2015’s collections to be less.
Youngstown received $42,878,600 in income and profit taxes last year.
That amount also includes refunds, and income tax paid by city residents who make their own estimated tax payments because they work for a company that doesn’t automatically take out that money or they’re self-employed.
The city had projected making $43,401,900 — $523,300 more than it collected.
In comparison, the city collected $44,450,700 in 2013 — its best year since 2008 when it received $46,430,600.
The $523,300 shortfall last year was covered by health-insurance savings and a workers’ compensation refund.
The city had projected $5.3 million from businesses that pay a 2.75 percent tax on profits for 2014, which would have been an increase of 18.2 percent from 2013. Instead, the city received $4,106,300 last year, an 8.5 percent decrease from 2013.
And 2013 was a bad year for profit taxes in which $4,486,000 was collected — 33.8 percent less than in 2012. In 2012, the city received a record $6,779,100 in business profit taxes.
“I call companies and have conversations with them to see how well they’re doing, and project off of that information,” said city Finance Director David Bozanich. “Companies were more optimistic about profits” than they should have been.
The city collected $38,004,300 last year in income taxes from those who work and/or live in Youngstown who pay 2.75 percent of their income.
That’s 3.3 percent less than the $39,313,300 collected by the city in 2013. But there is somewhat of a silver lining because the city had expected to collect $37,501,900 last year — a 4.6 percent decrease from 2013’s $39,313,300 amount.
The city will provide information as early as next week about the amount of its 2014 surplus, said Deputy Finance Director Kyle Miasek.
“We didn’t generate the money we expected, so the surplus” won’t be much, he said.
Miasek and Bozanich declined Tuesday to discuss the projected tax collection amount for this year, but both said it would be less than the amount the city received in 2014. That projection could be ready next week.
“We believe that 2015 will be a difficult year and 2016 will potentially be more difficult,” Bozanich said. “Our objective is to live within our means.”
The city will take three significant financial blows later this year that will be fully felt in 2016.
The closing of the Youngstown mail processing and distribution center in a few months will cost the city about $250,000 in annual income-tax revenue.
The relocation later this year of the Cafaro Co. headquarters will result in a tax reduction of about $300,000 annually.
The Northeast Ohio Correction Center private prison recently lost its contract to house about 1,400 federal inmates through the U.S. Bureau of Prisons effective May 31. It will continue to house 580 inmates under a contract with the U.S. Marshals Service, which expires Dec. 31, 2018, and is looking at other options to use more of the soon-vacant cells there.
It isn’t known how many of the prison’s 418 employees will lose their jobs, but they provide about $500,000 annually to the city in income tax, Bozanich said.
The city also receives $300,000 annually from the prison if the inmate population is at least 1,250. If it goes below that amount, the city would get $150,000 a year, and if it drops below 750, the prison pays nothing to the city.
Meanwhile, Vallourec Star could play a major role in financial problems the city will have next year.
The company will make its last $2.9 million annual payment to the city this year. The city received payments of that same amount in 2013 and 2014 for land the company leased from Youngstown as part of its major $1.1 billion expansion in 2013.
That money was used for capital improvements and equipment purchases, Bozanich and Miasek said.
Without it, they say, those improvements and purchases are likely to go.
Also, Bozanich said he can’t guarantee there won’t be layoffs of city employees this year.
“That will be determined through the budget process,” he said.