Income Tax Revenues
In the 2016 Operating Budget, revenue from the local income tax was projected to be $83,285,000, with 75% or $62,463,750 programmed in the General Fund, and 25% or $20,821,250 programmed in the Capital Improvements Tax Fund. Maintaining a conservative approach to estimating revenue, this estimate was based on an assumption of no change from the 2015 revised revenue estimate, determined when the 2016 Operating Budget was approved. However, actual income tax revenue for 2015 exceeded the revised estimate by 5.4%. As such, the 2016 estimated income tax revenue reflected a 5.1% decrease over 2015 actual collections.
The main driver behind the decrease in projected income tax revenue for 2016 was the loss of revenue from JP Morgan Chase and Nationwide Insurance. As previously reported to City Council, the first quarter ended with income tax revenues increasing 4.1% over the first quarter of 2015. Through the second quarter of 2016, income tax revenues increased 2.2%, or $1,014,916.
Income tax revenue through the third quarter increased with year-to-date revenues reflecting a 2.18% increase, or $1,476,846 over 2015. Withholding, the largest component of income tax revenue, reflected a 2.31% increase YTD despite revenue from Chase starting to decline in the third quarter. Revenue from net profits remained down 3.13% largely as a result from the loss of one of the City’s largest employers, while individual returns increased 9.09% over the same period in 2015.
Given the budgeted income tax revenues versus actual collections through June, Staff revised the 2016 income tax revenue estimate upwards by 2.8% to reflect anticipated revenue of $85,590,000, an increase of $2,305,000. This revised projection was utilized as a basis for the revenue in the approved 2017 – 2021 Capital Improvements Program (CIP). Based on revenue received through September, Staff believe that this estimate remains extremely conservative. In fact, in order for the City to just meet the revised income tax projection of $85,590,000, 4th quarter income tax revenue would need to decline 18.4% over last year’s 4th quarter revenue.
The graph below depicts the City’s income tax revenue through the second quarter each year from 2012 through 2016.
General Fund Balance
The General Fund balance is a critical component to the financial stability of the City and continues to be a key financial indicator used by the rating agencies in evaluating the financial strength of the City. As Council is aware, the City’s policy is to maintain a year-end balance equal to or greater than 50% of the General Fund expenditures, including operating transfers. As of September 30, 2016, the General Fund balance was $49,971,366, or 71.4% of the budgeted 2016 operating expenditures.
As Council is aware, the General Fund advanced money to the Capital Construction Fund and the Tuller TIF for projects that will be ultimately funded through the issuance of long-term debt. Specifically, a supplemental appropriation in the amount of $7,520,200 to the Capital Construction Fund was advanced from the General Fund as part of Ordinance No. 24-16. Of that amount $4,481,500 was for costs associated with roadway improvements within Bridge Street while the remaining $3,038,700 was for the Service Center expansion (as authorized in Resolution No. 29-16). Additionally, the costs of John Shields Parkway Phase 2 were advanced from the General Fund to the Tuller TIF. The amount of that advance was $8.3 million with $2.6 million being advanced in 2015 and the remaining $5.7 million advanced in 2016.
Based on the City’s upcoming bond issue in the amount of $10 million, a portion of the outstanding advances due to the General Fund will be repaid, increasing the balance. The remaining advances outstanding will be repaid in 2017 when a larger bond issue is completed.
If the $10 million in bond proceeds were reimbursed today, the General Fund balance would be approximately 85.7% of the budgeted 2016 operating expenditures. The City is fortunate to have a healthy General Fund balance which allows us the ability to cash fund projects either temporarily until a bond issue is completed, or for an extended period of time until TIF revenues are available to repay the advance.
Property Taxes and Service Payments
Property tax revenue in 2016 increased 1.0% or $33,339 over 2015. The total amount collected was $3,501,617 which was distributed between the Capital Improvements, Parkland Acquisition and Safety Funds.
Revenues generated from service payments, or payments in lieu of taxes, on properties within the Tax Increment Financing (TIF) areas increased 7.1% over 2015. Total collections for 2016 were $7,344,177.
Hotel/Motel Tax Revenue
The Hotel/Motel Tax Revenue collected through the third quarter 2016 totaled $1,539,731, which represents an $85,029 or 5.2% decrease over collections through the second quarter 2016.
As mentioned during the first quarter financial update, the decline in bed tax revenue beginning in February reflects the increase in funding (from 25% to 35% of the actual bed tax revenues) provided to the Dublin Convention and Visitors Bureau (DCVB). The gross bed tax revenues collected through the third quarter of 2016 increased 7.7% or $167,447 over the same time period in 2015. The above referenced numbers show the net amount receipted into the Hotel/Motel Tax Fund.
The amount for the DCVB is deposited directly into a separate fund established solely for their portion of the tax revenue. Through September 2016, the DCVB had received $800,515 in bed tax funds, which was an increase of $258,929, or 48% over 2015.
The Dublin Arts Council (DAC) has similarly seen an increase in revenue as a result of the increased collections coupled with the modification to their agreement which provides them with 25% of actual bed tax revenues as opposed to 25% of an estimated amount. Through September of 2016, the DAC had received $574,945 in gross revenue (prior to any deduction for rent and the art in public places program), which was an increase of $134,285 over 2015.
General Fund revenue totaled $59,607,608 through September. This was an increase of $3,819,088 or 6.8% over the September year-to-date 2015. As previously stated, this was driven by the increase in income tax collections, which increased $1,107,631 in the General Fund alone. Building activity throughout the City resulted in Fines, Licenses and Permits increasing $355,878 or 13.3%. This increase was offset by decreases in intergovernmental revenues of $123,314 and interest income of $189,691 (the Finance Department is still posting interest earnings from prior months as a result of our implementation of a new financial system). Miscellaneous revenue also decreased $328,808 over the same time period in 2015. This category of revenue is highly unpredictable and Staff only budgets for $75,000 in revenue for the year.
General Fund expenditures through September totaled $69,193,140, which was a decrease of 13.7% or $11,016,831 over the same time period in 2015. Excluding advances made to other funds, operating expenditures for the quarter were $49,729,963, which was an increase of 9% or $4,005,992 over 2015. This increase was driven by an increase in Capital Outlay as a result of the purchase of the property at Rings Road and Frantz Road (the Nationwide property) and the Rings Farm (Ordinance No. 02-16 and 05-16, respectively). Additionally, personal services increased $2,089,320 or 13.4%. A portion of this increase is due to there being three pay periods in the month of September in 2016, whereas in 2015, the three pay period month fell in October (4th quarter). A summary of the expenses are listed below.