Cleveland Heights Income Taxes Rebounding

Income tax revenue in Cleveland Heights has been down the past few years but is starting to rise.

As of June 30, income tax revenue was about $12.2 million, higher than other yearly collections since 2008. City officials are budgeting for income tax revenue of $21 million by the end of the year.

“I’ve seen an improvement this year in income tax collections through the first half of the year,” finance director Tom Raguz said. “Now the main thing going forward is, can we keep it up. Last year was the lowest year that the city has had in the last several years in income tax collections.”

And since 2008, income taxes have been on a decline. Total income tax revenue for the past four years has been:

• $21.4 million in 2008
• $20 million in 2009
• $20.4 million in 2010
• $19.2 million in 2011.

Raguz attributes last year’s decline — and this year’s increase — to the , a statewide organization that collects income taxes. It takes time to get on the collection cycle, Raguz said, but the agency also has more resources available to recoup collections.

“We made a ,” Cleveland Heights Mayor Ed Kelley said. “Not only do we as far as the cost, not having any employees in the city doing it, but (it) also benefitted us by collecting more money for us.”

More income tax is good news for Cleveland Heights, as the collections make up about half the city’s roughly $40 million general operating fund.

“It’s not the whole story, but it’s an indicator of the local economy and the local finances of the city,” Raguz said.  

The city has a 2 percent income tax rate with up to a 0.5 percent credit for residents who work outside city limits. Of last year’s collections, which Raguz said has pretty much stayed the same the last several years, 63 percent came from individuals who work outside Cleveland Heights.

Kelley said over the years University Circle has been an economic engine for the city. There are a wealth of jobs at Cleveland Clinic, University Hospitals, Case Western Reserve University and other nonprofits. Those workers translate into customers and residents who have supported, if not directly, city income taxes.

“A lot of these people end up buying their home or renting in Cleveland Heights or spending their time having dinner or shopping in Cleveland Heights,” Kelley said. “We’re famous for our restaurants. Most, if not all our restaurants, are owned and operated by families. We don’t have a lot of Applebee’s and Bob Evans and things of that nature.”

The city doesn’t have any land zoned for manufacturing. Kelley said Cleveland Heights also doesn’t have the air quality and traffic concerns that accompany manufacturing plants, including the city’s dependence on one employer for a majority of income tax revenue.

But that doesn't mean city officials haven’t made some tough cuts over the past few years. Even before the recession, income tax revenue was flat. Kelley said they knew a downturn was coming, so the city eliminated some positions, left others unfilled and made employees take furlough days for a year.

Today, Kelley said the city is slightly ahead but still has a long way to go.

“We have to stabilize the foreclosure market,” Kelley said. “We have to develop new sources of income tax revenue. We have to continue to make sure our police and fire have the best equipment and best staffing to deliver the best fire and safety forces in the state of Ohio. Our residents deserve that, and they won’t settle for anything less.”

Editor’s Note: In this series, Patch gauges the recovery of 18 Ohio communities based on income tax receipts since the Great Recession. Read about