XENIA — City governments aren’t immune from feeling the financial effects of COVID-19.
Although still in good shape financially, Xenia is expecting to see its once-promising income tax collections begin to decrease due to the filing deadline extension. Year-to-date tax collections were up through March but filings have decreased in April, according to Finance Director Ryan Duke.
“Typically by April 14th the city would have received a much larger portion of the returns for the prior year,” Duke said in an email. “With the extension through July 15th our filings are way down. Most of the discrepancy we are experiencing this month is a timing issue and not an employment issue.”
But that will change in the coming months as the closure of businesses and correlating unemployment will become a “more significant issue.”
“Employee withholding collected and remitted by employers will undoubtedly be impacted,” Duke said. “It is difficult to project what the impact to income tax collections will be, but we have been advised that we should expect a reduction of around 20 percent for a 3-month period. That is an educated guess based on some preliminary data, but it gives us a place to start.”
That “start” starts with spending.
“The city is already taking some steps to reduce expenditures by eliminating business travel and conferences, postponing certain capital expenditures, and by planning to leave some positions unfilled as they become vacant,” Duke said. “There will likely be some amendments to the original plan for the 2021 tax budget as we begin to prepare that in the coming weeks.”
Business closing and correlated unemployment are also having a trickle-down effect on other sources of city revenue.
“One example of this would be a hotel,” Duke said. “The city does receive an occupancy tax when someone stays in the hotel or motel. It appears that for a least a few months the city will experience a reduction in revenue on this front. A direct impact could also occur if the employer is a significant user of water. Anytime the city loses a significant water user it could potentially have an impact on rates moving forward.”
Currently there is no cash flow issue as the city does maintain a reserve for “situations such as this,” Duke said.
“If however it is necessary to use some of the reserve funds, then we will have to develop a plan to replenish these funds,” he said.
That doesn’t mean a tax levy is forthcoming.
“At this time it would be premature to talk about the need for a levy,” Duke said. “It is very difficult to project the scope of financial difficulties ahead, though we know that there will be a negative impact. There are no plans or even discussions at this point about an operating levy. We will continue to monitor both collections and economic trends and steward the public dollars to the best of our ability in these unprecedented times.”