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McClatchy-Tribune  08/03/2014 8:28 AM ET
Dayton revenues fall short of projections [Dayton Daily News, Ohio :: ]

Aug. 03--The city of Dayton's revenue through the first half of the year fell short of projections, raising concerns about the health of its income tax collections.

The city spent $2.8 million more than it received in general fund revenue through the end of June. Weaker-than-expected income tax collections were the primary source of trouble, with taxes on business profits off 15 percent.

City officials say it is too soon to tell whether collections reflect reduced consumer activities tied to the coldest and snowiest winter in years, or if deeper problems in the local economy are to blame.

But they say some promising projects are nearing materialization that should boost local hiring and add to the city's tax base, which hopefully should help the city avoid spending more of its cash reserves than originally planned.

"We're hearing of good news in the community with jobs coming, but we just haven't seen the jobs come yet," said Mayor Nan Whaley.

The city needs to continue to identify ways to increase revenue and reduce expenses, officials said, even after it has recently tried to stabilize finances through making its entire income tax permanent and last week approving a program that would charge property owners for street lighting.

The city of Dayton took in $78.4 million in general fund revenue through the end of June, falling 3 percent short of budget. The city spent $81.2 million during that time, 1.5 percent less than anticipated.

Fees, charges, interest earnings and other operating transfers produced $15.3 million in revenue, $1.1 million less than predicted. Local government funds, emergency medical service fees and casino revenue also came up short, but not by sizable amounts.

About two-thirds of the city's general fund revenue comes from income taxes, which were off budget by 2.7 percent, or $1.4 million. Collections have dropped 2 percent from the same period in 2013.

Severe winter weather likely contributed to the disappointing collections, as consumers chose to stay indoors instead of go out to dine, shop and spend money, officials said. Between January and March, the U.S. economy shrank at the sharpest rate since the worst parts of the recession, and many economists attributed the contraction to terrible weather.

Declining collections often mean employers are cutting workers or wages are sagging.

Employment in the Dayton metro area this year has been lower than in 2013 in every month except April, according to the U.S. Bureau of Labor Statistics. The metro area, however, includes Greene, Miami, Montgomery and Preble counties.

And yet the city's withholding collections are flat, which are the taxes deducted from employees' paychecks, hinting at some stability in the job market, said Barbara LaBrier, the city's director of management and budget.

Taxes from business profits were a problem, having declined $1.1 million, she said.

"What's concerning about the income tax number is what it suggests about how businesses are doing," LaBrier said.

LaBrier said the figures do not necessarily mean that Dayton businesses are less profitable, because many companies estimate what they believe their profits will be before the actual numbers are available. Businesses oftentimes use conservative estimates and increase their tax liabilities later on.

If the revenue picture does not improve, the city may need to reduce departments' personnel budgets, though staff cuts should not be required, LaBrier said.

At this time, it should not be necessary for the city to dig deeper into its cash reserves, she said. The city already planned this year to spend about $3 million out of its savings.

The city began 2014 with $22.1 million in its general fund cash reserve, which represents seven weeks of operating reserves, LaBrier said. The city's goal is to ensure it has between six to 10 weeks of reserves.

City commissioners may remove some pressure on the city's general fund budget from their decision last week to approve the street lighting assessment, which creates a dedicated source of revenue to improve and maintain the city's street lights.

The assessment would generate about $3 million annually and reduce some costs that are currently paid out of the general fund, officials said.

Whaley said the region has struggled to create new jobs, and the lack of a robust recovery has hurt employment in Dayton.

Despite the revenue shortfall, Whaley said all of the local companies she has talked with have increased hiring or plan to soon.

"We're hearing anecdotally that there is movement up," she said.

Procter & Gamble's Union distribution center expects to create about 800 jobs after it becomes operational next year.

Fuyao's Moraine plant is expected to employ about 800 people, with job openings already appearing online. Hollywood Gaming at Dayton Raceway, which opens in August, expects to have about 500 permanent employees.


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