Even so, the city faces an impending financial structural imbalance that it needs to address when its pandemic aid dries up, said Abbie Patel-Jones, Dayton’s acting director of procurement, management and budget.
“General fund revenues did see strong growth in 2021 and 2022,” Patel-Jones said. “However, revenue performance has slowed down in 2023 and this slowed-down revenue performance is expected to continue the trend in 2024.”
Dayton City Commission recently approved a temporary appropriations ordinance for the 2024 budget.
The city predicts that its general fund will receive $211.8 million in revenue next year, not counting federal COVID relief money the city received.
Dayton expects to end 2023 with 0.3% less general fund revenue than in 2022, or a decrease of about $730,000, city data show.
Dayton’s general fund revenue has declined several times in the last 15 years, but not since 2016, when city voters approved an income tax hike.
Income taxes
Most general fund money comes from the city’s income tax — nearly three-fourths. Those collections underperformed expectations this year.
The city expects to finish this year with about $151.7 million in earnings tax revenue, a $2.8 million reduction from 2022 (-1.8%).
This would be the first decline in income tax revenue since 2010, even though some of those years basically had flat collections.
Income tax revenue increased substantially after voters approved a tax hike in 2016.
Earnings tax collections saw robust growth in 2021 and 2022, when strong fiscal and monetary spending bolstered the economy, said Patel-Jones.
The city benefitted from large increases in taxes from business profits in both of those years.
But revenue from business profits declined sharply this year, Patel-Jones said, who also noted that rising costs “eroded” some of the strong revenue growth seen in those two years.
2024 budget
Next year, the city expects its general fund revenue will grow by nearly $2.9 million (+1.4%). City income tax receipts are projected to increase 2.1%.
But expenses are rising, and the city next year plans to use about $2.7 million of its $138 million in federal COVID relief aid for general fund revenue replacement.
The 2024 budget is balanced using money from one-time sources and solutions, including the federal COVID relief grant. Other “budget solutions” include temporary federal funding for police and fire employees and savings from vacant city positions.
Patel-Jones said the city will need to figure out some budget solutions for 2025 to close an anticipated gap between expenses and revenues, when COVID aid goes away.
“We’re facing a very difficult budget process in 2025,” said Dayton City Commissioner Darryl Fairchild.
He said city staff and elected leaders need to start discussing what the city plans to do about the projected funding gap. Expenses are growing at a faster pace than revenues, in large part due to inflation, city officials said.
Federal COVID aid can only be used for revenue replacement through 2024.
City staff said the city may have to make some program cuts or reduce its investments because of the budget challenges in 2025.
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