Presently, when residents live in the city but work in another taxing district, Norwalk doesn’t receive any income tax from them. However, those people still receive city services.
Norwalk officials estimate this is the case for about 20 to 25 percent of the taxpaying residents.
Finance director Diane Eschen explained one roadblock during Tuesday’s council work session. She said the city software isn’t able to do a search of how many people pay income tax to Norwalk, but don’t live in the city. She told council that in order to get that number, it would have to be hand-counted.
“We’ve been told that’s a significant (number) also,” said Chris Mushett, an at-large councilman.
The proposed ordinance would mean in tax year 2017, residents would get a 75-percent tax credit in Norwalk. After that, it would be 50 percent. If the ordinance passes, residents essentially would pay taxes in two places.
The ordinance is set to go before council for a vote at Tuesday’s meeting.
“It doesn’t have to be voted on Tuesday. It could be amended Tuesday; there are a lot of things that could happen,” said Steve Schumm, an at-large council member.
Council president Steve Euton said he doesn’t expect to vote Tuesday unless there’s a tie.
“I would like to see it be voted up or down, so we can move onto other things,” he added, but he wants to make sure council has discussed the reciprocity tax sufficiently.
“The residents that I have talked to would have a tax increase and those folks don’t support it and are against it,” Euton said.
“I have not made my decision. I have a good idea where I’m heading,” said Mushett, who declined to elaborate. “I’m looking for more information from the administration.”
Councilwoman Deb Lucal, who represents the first ward, plans to vote against the ordinance.
“I was not in favor of it (at first), so I’m still not in favor it,” said Lucal, who has heard from at least 50 people in her ward who are against the proposal.
While those residents may not have spoken out publicly, she said “they have called and told me how they feel.”
“There has to be another way to raise funds,” Lucal added.
“Most of the people moving into town are from out of town,” she said, and do so because of Norwalk’s schools, parks and churches. “When both spouses work out of town, they choose Norwalk as the central spot.”
Norwalk Mayor Rob Duncan started Tuesday’s work session by saying the proposed ordinance is an option to generate more revenue for the city. He also said if Norwalk continues on the same trajectory, the city could face financial challenges in the future and the proposal “could close the gap.”
Norwalk has lost $2.4 million in local government funds since 2011, safety-service director Dan Wendt said, so Gov. John Kasich “could hold that out to build up a rainy-day fund.” Wendt said the proposed ordinance for the income tax credit — aka reciprocity tax — is a “direct response” to that move and the general fund part of the collected money would finance the fire and police departments.
Like Lucal, Mushett also has heard a loud “no” from city residents about changing the tax credit.
“They’re overwhelmingly opposed to it,” said the councilman, who has heard from people on both sides of the issue who are against any changes to the tax credit.
“They already feel like they’re being taxed,” Mushett added. “It seems unfair to them to pay what they feel is an additional tax.”
Similar to Mushett, Schumm wants more information before making his decision.
Schumm, who is unsure what his vote will be, said he has been thinking about the issue “quite a bit” and wants council talk about it more before making a decision.
“It’s going to take more conversation,” he added.
Schumm said he would prefer seeing an income tax credit that lasts for a “designated amount of time” — not a change that is continuous. He added he could support a five-year plan and, if the economy improves, council could take another look at the issue.
“I’m not going to be in favor of (a) 50 percent (credit),” Schumm added. “I’m looking at more information.”
Residents have told council members and city administrators they are concerned about being “double-taxed” or feel like they are being asked to pay more taxes.
While Schumm said he has heard from residents that “people should pay something,” he understands some people who had to find work outside of Norwalk feel like they would be be penalized by paying taxes in two cities.
“I will be voting ‘no,’” said at-large Councilman Kelly Beck.
“I haven’t had one neighbor — one person who lives in Norwalk — who thinks this is a good idea,” he said. “People don’t think it’s fair.”
Beck said if the city administration had educated council more appropriately about the proposed ordinance, it might have a better chance of passing. He also said he’s heard from residents that the amount of people who work within Norwalk vs. elsewhere “all evens out.”
Council members Chris Castle, David Wallace and Samantha Wilhelm couldn’t be reached for comment Friday.
Beck and Mushett have asked administrators what kind of research with other cities and villages they did before proposing the reciprocity tax.
Wendt told the Reflector the city relied on information from the Ohio City Managers Assocation and Ohio Municipal League. He noted they are the preferred sources of information “for city administrators to rely on.”
“Reduction of the credit is more common,” Wendt added.
The safety-service director declined to say which area cities or villages he contacted in researching the reciprocity tax.