Stow’s Income Tax Numbers Rising, But Not Fast Enough

Income tax collections in are back up to pre-recession levels, but the city still hasn’t recovered fully from the Great Recession.

“We recovered somewhat with income tax collections, but we really should be higher than that,” finance director John Baranek said. “With the recession, it’s held back the collections we would’ve seen in a five-year plan.”

Revenue is up, and right now, the city is still on target to finish that way.

Collections so far are above monthly projections. Through July, the city collected about $8.2 million in income tax this year, roughly $328,000 more than through July 2011.

Total income tax revenue was about

• $12.9 million in 2008
• $11.9 million in 2009
• $11.6 million in 2010 and
• $12.8 million in 2011.

Baranek budgeted $12.9 million for the year, which would bring revenues back in line with pre-recession levels.

“I look at numbers and can see recovery because I’m seeing an increase in employer withholding from salaries,” said tax administrator Dennis Bernaciak. Withholding taxes made up 68 of income tax collections last year. Bernaciak said the numbers show total wages being paid to Stow are going up, though he doesn't know if it’s the result from raises, increased hiring or both.

“It’s significant because increases are in area of withholding. That is a very good sign because more money is being paid to people working in Stow.”

Economic development director Mike Weddle said when he first came to Stow in August 2008, he thought the city was going to dodge the recession bullet. It took until mid-2009, but the recession eventually hit the city. Interest among companies shopping the area for a location fell. The city lost jobs and lost companies, including the Davey Resource Group, that .

Vacancy rates have fluctuated the past few years. From July 2010 to January 2012:

• office vacancy rates increased from 12.8 to 15.3 percent,
• retail vacancy rates have decreased from 13.7 to 11.3 percent and
• industrial vacancy rates have decreased from 13.9 to 7.5 percent.

Stow managed to fill some industrial building vacancies. Two companies, and PneumaticScaleAngelus, chose to locate here and bring 80 to 100 jobs each.

“Everything’s a little more subtle here because we don’t have a lot of large businesses,” Baranek said. “Our businesses are spread out between medium and small businesses, so the effect isn’t seen as quickly as a plant closing down like Chrysler.”

Any predictions Baranek makes about the following year could change after the presidential election, but for now he expects this year’s 1.5 to 2.5 percent increase in total income tax revenue to continue.

In the past, the city typically saw a 3 percent increase in income tax revenues year over year. Baranek said the city hasn’t seen that during the recession because of businesses imposing wage reductions, hiring freezes and reduced staffing amid increased cost of living.

What hurts the city the most, Bernaciak said, is that the money could have been spent on something it needed but the money is gone for good.

In response, the city has tried to keep the base services residents have come to expect, such as police and fire departments, while waiting to offer other services until it can afford them. At the same time, the city has also frozen city employee wages and nonessential hiring. City officials also sought financial support from the state and federal government rather than a tax increase.

Essentially, the city is applying its approach to street repairs to overall city government: patch potholes rather than repave an entire road.
 
The city’s overall budget for the year is $24.7 million, and as it has the past two years, the city is tapping into roughly $260,000 of the city’s $2.6 million general reserves fund to make up for less revenue.

“We continue to look at our budget to maintain our budget and stay within the guidelines that we have,” Baranek said. “We tried to eliminate any of the increase(s) that we do have.”

Stow officials remain focused on attracting manufacturing as well as office jobs. Ultimately, Weddle said he would like to have more medical space.

Good thing there’s plenty of room for growth and development.

Looking at a zoning map, Weddle moved his hand to the northwest corner of the city, shaded in light purple, with about 600 acres of undeveloped zoned industrial land. He noted a fraction of the land’s geology is not suited for development.

“As soon as the economy picks up in earnest we’ll go into a full blown, not just recovery period, but continue the expansion from yesteryear,” Weddle said. “In Summit county, I’m projecting you’ll see a lot of attention directed toward Stow and primarily in this area here as we look at it.”

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