City Counting on Tax Enforcement to Close Budget Gap

Cleveland Heights plans to close a gap in the city budget caused by cuts in state aid by beefing up income tax collection enforcement.

The biggest hit comes from the state and county local government fund — the state will slash about $1 million, said Tom Malone, the city’s finance director.

“It certainly isn’t a pleasant picture, seeing what’s going on, not only in the state of Ohio, but in Cuyahoga County,” he said.

In 2011, Cleveland Heights received about $2.78 million from that fund. Next year, it will be parsed down to approximately $1.85 million, he said.

But the general fund in 2011 is similar to projections for 2012 thanks to the Regional Income Tax Agency, which plans to collect about $2 million more in municipal income taxes in 2012 than in 2011, Malone said.

Rick Carbone, executive director of R.I.T.A., said despite the challenging economic conditions, he is confident his agency can collect more than $21 million in 2012 and sustain higher collections than in the past.

“One of the biggest things is we have access to federal tax information, which local municipalities do not have,” Carbone said. “We’re counting on tools that we have available to us that a (city) does not have to track down delinquent, non-paying, non-filing taxpayers.”

passed the final general fund budget for 2011, which was about $40.9 million at , and the projected general fund budget for 2012, which is budgeted at $40.6 million.

Cleveland Heights closed its income tax collection department, eliminating 12 jobs, and in July. R.I.T.A. is a non-profit governmental agency and the largest municipal income tax collection agency in Ohio. The city in income tax collection costs.

For the past few years, municipal income tax collections have been down. He added that the income tax rate hasn't changed since 1979.

Cleveland Heights lost about $1.5 million from 2008 to 2009, Malone said.

“That’s a 7 percent drop in income tax collections. Those are not pleasant signs. That’s a big decline,” he said.

Collections increased slightly from $20.1 million in 2009 to $20.5 million in 2010. Because R.I.T.A. wasn’t fully operational until September, the city estimates it will collect about $19.13 million by the end of the year, Malone said.

Several factors are at play, he said.

The unemployment rate in Cleveland Heights is about 7.3 percent as of August 2011, . But that number is down slightly from last year’s figure of 7.8 percent.

The population also dropped 7 percent from 2000 to 2010, And the number of vacant housing units, which include owner-occupied and rentals, jumped to 11.2 percent in 2010 from 4 percent in 2000.