City income tax collections make stunning turnaround

0

Marysville’s income tax collections were better than expected this year.
In fact, the numbers were so good that during a recent finance committee meeting, Finance Director Brad Lutz assumed the number was a mistake and told participants to ignore it.
Committee members decided not to approve his report until the numbers were correct. When Lutz went back after the meeting, he discovered that a strong July pushed the city above expectations. He said that as of July 31, the city was about $491,000 “ahead of last year’s income tax collections.”
The finance director said the good news means, “the city is in no way at risk of losing services because of the COVID-19 outbreak.”
This year, the city moved the deadline to file and pay income tax from April to July due to the COVID-19 pandemic.
Lutz said the city received a surge of revenue in the final days for income tax collections. He said that while self-employed individuals are required to pay an estimated tax quarterly, “some people pay religiously, some people still wait till the last minute.”
Based on the revenue at this point in the year, Lutz said he expects that despite the pandemic and the economic issues it caused, the city will meet, if not exceed the 2020 estimate of $18.8 million in income tax revenue.
He said it is difficult and too early to know how the pandemic will impact income tax refunds and last-minute filings for 2021.
Income from the city’s largest 10 tax payers is up more than $880,000 over the same period for 2019. The state does not indicate which companies are the largest tax payers in the city. Some of the businesses have paid more in 2020 and others have paid less. The city’s largest tax payer has paid nearly $883,000 more in 2020 than it did in 2019.
He said that is “good for the city because it really shows the health of the city and our largest employers.”
“We are going to be conservative with our revenue estimate going into 2021,” Lutz said.
He noted that, “for our 2021 budget, I would anticipate our revenue estimate would be likely flat.”
Lutz’s interpretation was not unreasonable.
The finance director said that going into the July income tax deadline, self-employed and business and corporate income tax revenue was “well below prior year collections.”
Going into July, the city was more than $277,000 below last year’s collections. At that time, Lutz was not optimistic the city would be able to meet last year’s income tax revenue, saying he was hopeful the city could simply “close the gap.”
While income tax receipts account for more than 80% of the city’s general fund revenue for the year, there are other funds that pay into the fund. They have also been impacted by the pandemic.
The city’s bed tax collection is down. He added that while he expects that as things get back to normal, the bed tax will also return but money not collected during the pandemic is “lost revenue.”
Lutz said revenue from fees, licenses and permits are, “down from last year, a symptom of the COVID-19 event.”
He was more optimistic about the city’s ability to recover that money.
“I would expect some of these revenues to rebound during the rest of 2020 as long as there are no further shutdowns since activities related to this type of income has been put on hold versus cancelled,” he wrote in notes to the city’s finance committee.
He said earnings on investments are “on track to exceed estimated receipts for 2020.”
He added that the effects of COVID-19 on global markets will impact return on investments going forward.
“Even that being the case, failure to meet the estimated receipts is not a concern at this time,” Lutz wrote.



...For the full story, select an option below.

Comments are closed.