Marysville City Council spent much of Monday night’s work session discussing the 2021 budget.
As part of the discussion, Council Member Aaron Carpenter said he wanted to gauge the support for a commuter tax credit.
Currently, a Marysville resident who works in another community pays income tax in both the city where the income is generated and also 1.5% in Marysville where they live. Many communities extend commuters a tax credit to lighten the tax burden on their resident who work in another community.
Finance Director Brad Lutz said a 0.25% credit would cost the city about $640,000 annually.
Carpenter said he has heard many residents of his ward ask him about it.
He told council he believes “the number one reason I was elected was to get this (commuter tax credit) done.”
He said he knows the lost revenue would create a burden for the city, but would create relief for many residents.
“I think they would be so thankful if we can get this done for them,” Carpenter said.
He said the city should look at cutting the budget to make up for the lost revenue.
He asked other council members what they thought of a commuter tax credit. He told council members that he has had discussions with City Manager Terry Emery who said he could see “a prospect to make that happen.”
Emery stopped Carpenter’s comments there.
“I haven’t had any conversations that this could be done without significant impact on services,” Emery said.
He said Carpenter’s ward complains often about streets and he does not think they “would be inclined” to support the tax credit if they understood the service and project cuts that would need to be made.
“I guarantee you there would be very little street infrastructure work done,” Emery said.
Council member Deborah Groat told Carpenter she was opposed to the credit.
“Any tax credit allowed to one group results in a commensurate burden placed on another group,” Groat said. “If commuters receive any tax credit, the dollars will need to come from the noncommuters who have no control over the decisions of the commuters.”
She said that while she does have compassion for those who commute, “I have greater commitment to the residents who live where they work.”
“In consideration of the commuters, we would be spreading the burden among those in the city who have chosen to live where they work, which is negative incentive to live where you work.”
She said the logic that a commuter costs the city less is “faulty and unquantifiable.”
Additionally, Groat said she feels the discussion is “political posturing.”
Council Member Mark Reams said voters approved the income tax structure as it is. He said he is not opposed “philosophically” to reducing taxes, but knows that it would have a practical impact on city services.
Mayor Henk Berbee said the city would lose a lot of quality of life services and facilities that draw residents to Marysville.
He told Carpenter that while he appreciates the conversation, “unfortunately, you are the only one” wanting a commuter tax credit.
Carpenter said he anticipated the response. He said that while some council members oppose the credit, he didn’t hear from all of them. He said if anyone supports him, they should speak up.
“It would be nice if I don’t have to do it alone,” Carpenter said.
He said that despite the opposition from other council members, he is planning to present a proposal that cuts the budget and creates the tax credit.
Lutz said this is “a very difficult time to move forward with something like this.”
He said that based on projections by other finance directors, the city can anticipate income tax receipts being down about 5% below expectations. He said that through April, the city has about received about $6.9 million in income tax revenue — about 37% of the projected $18.8 million.
“We are still on pace through the end of April,” Lutz said, acknowledging that the next months will be “a very telling time.”
He said that based on revenue and expenses, even in light of the COVID-19 pandemic, “we are still in a very healthy position.”
Lutz said that at the end of the year the city had $7.8 million in reserves, “so we absolutely have some room to play because we haven’t hit that $6 million.”
The finance director said that as he began planning for next year’s budget wanted to know “what absolute minimum number” the members would be comfortable with.
He said the city had set $6 million as the minimum reserve. That represents between three and four months of operations expenses.
Groat said she likes to have several months of expenses on hand and “dipping much below $6 million…makes me nervous.”
Council member J.R. Rausch, who initiated the conversation at a recent finance committee meeting, said he would be in favor of using a portion of the reserve fund. He said he believes the city reserve will quickly return once the pandemic is over.
“I would have to delay certain projects that we want to get done, just so we can have $6 million in the bank,” Rausch said.
Council Member Donald Boerger said he would like to see equal amounts of budget cutting and reserve use.
“What are we going to do in the budget to push things back, before we go and dip into that reserve?” Boerger said.
Reams said he is willing to dip into reserves, but not so far in that the city, “can’t react to an emergency.”
Council Member Alan Seymour said he would like to keep moving forward, getting monthly updates on revenue and expenses.
“When the time comes that desperation comes knocking at the door, then we address it,” Seymour said.
Berbee told Lutz it is unlikely “council can give you a number everyone is comfortable with.”
Lutz said he hopes it is not an issue. He said city officials will continue to look at areas to reduce costs and hope the city finances “would get right back where we were.”