Funding from the income tax would be used to replace revenue from the terminated property tax levies — to hire five police officers and five public service workers, to complete infrastructure improvements and to fund general city operations, according to the tax ordinance.
City officials say they have a $200 million backlog of incomplete infrastructure projects, which currently has no dedicated funding source.
Types of income that would be taxed include earned income, such as wages, salaries, tips and commissions, as well as lottery, gambling and sports winnings, according to city documents.
Types of income that would not be taxed include retirement income, such as Social Security benefits, pensions, retirement benefit payments, annuities, and disability payments. Military, reserve and National Guard pay would not be taxed, nor would “intangible” income such as interest, capital gains, and dividends.
Beavercreek’s income tax measure includes a 100% credit for taxes paid to other cities. In Ohio, people pay income tax to the city where they work before their city of residence, so a Beavercreek resident who works in another city that has a tax rate equal to or higher than Beavercreek’s would not also pay income tax to Beavercreek.
Recent census data indicates that 23,365 people work in Beavercreek but live elsewhere. Just shy of 16,000 people live in Beavercreek but work in other cities, and 2,958 people both live and work in Beavercreek.
Per the city budget, Beavercreek currently relies on property taxes for nearly half its income, according to Brian Jarvis, co-chair of the Beavercreek Fairer Funding Committee. Jarvis, a former Beavercreek mayor and city councilman, said the city’s infrastructure backlog dates back to the city’s founding in 1980, when the city had a $1.4 million shortfall, according to reports at the time.
“Beavercreek has never — not a single year in its history — has had enough property tax revenue to fund its city services. Why would we want to stay with a system that has never, ever worked?” Jarvis said. “For the first time in the city’s history, people who work in Beavercreek and live elsewhere will pay for the public services they use.”
The 1% tax would generate an estimated $12 million in its first year, going up to $18 million annually from individuals who work in Beavercreek, City Manager Pete Landrum previously told the Dayton Daily News. In the future, how the money is used will be determined by the city’s annual budgeting process, proceedings for which are open to the public.
The reduction in property taxes will amount to $6.9 million in reduced revenue annually for the city. The first year income tax revenue from Beavercreek residents alone is $5.4 million, netting a reduction in taxes from the city overall, Jarvis said.
However, the net gain isn’t universal. Resident Tony Corvo, a member of Beavercreek Tax Busters, said the taxes for his household will actually increase.
“The city is a small player. It counts for 8% of the total tax bill,” he said, adding that Greene County and Beavercreek Schools also dip into Beavercreek property tax costs. “The city tries to pretend it’s just a switch in taxes, when income taxes are fundamentally different from property taxes.”
Corvo and the Beavercreek Tax Busters oppose the levy because retirees who aren’t taxed will see a likely reduction in their overall tax burden, while younger professionals and renters will see those costs passed on to them.
“When you look at Beavercreek, people are continuously moving here. Businesses are continuously moving here. A few years ago Beavercreek was listed among the top 100 places to live in the United States. So the question to the city is: what is wrong with Beavercreek the way it is now?” he said. “If you need a special levy to fix infrastructure, put the levy out, instead of saying we have to change forever the future of the city. Once the income tax is here, it’s here to stay.”
Proponents say change is necessary because the city’s current funding model is unsustainable.
“It can’t last forever. Something is going to collapse in time,” Jarvis said. “It looks good on the surface, but underneath things are falling apart.”
City officials say the income tax grants them necessary flexibility to carry out their duties.
“(Property tax) levies silo funding and do not allow city council to perform their legal responsibility of determining the city’s priorities and needs, and places the city in a possible and unnecessary financial danger when emergencies occur,” Landrum said via email Friday. “For example, following the 2019 Memorial Day tornadoes, the city had to loan money from its general fund to the street to pay contractors for tree removal and to pick up debris. The city could not use property levy funds that are earmarked (restricted) for the police department or parks division regardless of the reason.”
Beavercreek is one of only a few cities statewide, including Bellbrook, that do not levy an income tax, according to state records. Nearby, Kettering, Xenia, Fairborn and Huber Heights all have city income taxes of 2% or 2.25%.
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