Banking & Finance and Government

Wyoming explores income tax

City releases feasibility study as part of ongoing effort to identify new revenue streams.

December 8, 2017
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(As seen on WZZM TV 13) Citing the rising cost of services and revenue limitations contributing to a structural deficit, the city of Wyoming is again exploring adopting an income tax.

In September, the city contracted Eaton Rapids-based Great Lakes Economic Consulting LLC to do a $15,000 feasibility study on the costs and benefits of enacting a personal income tax.

The report was finished in October and presented to the city commission during its Dec. 4 meeting.

This isn’t the first time Wyoming has considered such a measure.

In 2009, during the peak of the Great Recession, the city council discussed the idea. Ultimately, leaders decided in favor of belt-tightening measures, such as restructuring personnel, consolidating services and passing, then renewing a public safety millage.

Other expense reductions and cost-saving measures the city has implemented over the past decade:

  • Moved public safety dispatch operations to Kent County

  • Closed city hall on Fridays and shifted most employees to a four-day work week

  • Made significant contract changes, including changes to health insurance

  • Closed the defined benefit pension and health plans, shifting to defined contributions

  • Reduced personnel

  • Retired bonds early

City Manager Curtis Holt said the city is running out of options for creating a sustainable revenue base, with falling property values, state revenue-sharing losses, rising costs of wages and benefits for personnel, and increased demand for services such as police and fire.

He also noted since the statewide Headlee Amendment passed in 1978, which caps the amount of property tax revenue local governments can collect, property tax revenue has not been able to keep up with inflation and service delivery costs.

“We have been running a structural deficit for many years,” he said. “The last few years of property tax growth, the cost of living has been 0.03 percent and 0.09 percent. Property taxes represent 50 percent of our general fund revenue, and all other sources remain stagnant, not counting the loss of $30 million-plus in state shared revenue over the past 10 years.

“The structural deficit is simple. Seventy percent of what we do involves people. Seventy percent of our budget in the general fund is public safety. Calls for service continue to rise, yet employment remains stagnant. Even with stagnant employment, health care costs continue to rise, (and) utility cost increases, etc., all exceed 0.03 percent and 0.09 percent.”

The feasibility study found the city could raise $23 million annually in revenue from Wyoming businesses, residents and nonresidents working in the city if voters approved an income tax.

Specifically, $10.9 million would come from a 1-percent resident income tax, $9.8 million from a 0.5-percent nonresident income tax and $2.3 million from the corporate income tax.

If implemented, the income tax would be paired with a 7.1405-mill reduction in property taxes for Wyoming homeowners to offset the increase.

According to the feasibility study, the average taxable income in Wyoming (2018 estimate) is $48,200, the average taxable home value is $53,700 and the average household size is 2.5 individuals.

The average tax increase for homeowners would be $84, calculated by $467 in income tax minus a $383 property tax cut. This assumes that the average home value would be two times income (taxable value is 50 percent of market value).

Renters would not receive a direct benefit from a property tax cut.

Megan Sall, assistant city manager, said it’s important to note the income tax is only one of several options on the table, including additional millage requests, further reducing employees, raising water and sewer rates, and creating an authority to oversee water and sewer treatment operations.

“It’s just a feasibility study,” she said. “We have not said or decided we are going to implement an income tax. The study was purely done to see what the numbers would be if we were to implement one.

“The only way we could implement an income tax would be by vote of the people, so the residents will definitely have a say.”

She echoed Holt’s concern over budget issues.

“We can make structural changes, but we get to a point where we’ve done all we can, and then we have to look for something else,” she said.

“For us, this is about exploring all the options, making sure we have good data and bringing it back to city council so they can make a good decision about where they think we need to go.”

Holt said Wyoming stacks up favorably to Grand Rapids and Kent County when it comes to fiscal responsibility.

“We continue to operate very efficiently, (and) the number of (city) employees per thousand residents is among the lowest in the state. Water and sewer costs are among the lowest in the state. We are one of the only accredited police departments in West Michigan, and we are leaders in finding new and unique ways to deliver service,” he said.

Sall said the next step is for city leaders to closely examine the report and decide how they want to move forward.

Depending on the outcome of that discussion, there would be an opportunity for public comment, she said, but a timeline has not been determined.

“We’re most focused on what are the needs, what are the services our residents desire and how do we find a sustainable way to fund those moving forward,” she said.

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