Income Tax Revenues
In the 2018 Operating Budget, Staff projected $86,000,000 in revenue from the local income tax, with 75% or $64,500,000 programmed in the General Fund, and 25% or $21,500,000 programmed in the Capital Improvements Tax Fund. Maintaining our conservative approach to estimating revenue, this estimate was based on an assumption of a 0.4% increase over the 2017 revised revenue estimate, determined when the 2018 Operating Budget was approved. However, our actual income tax revenue for 2017 exceeded the revised estimate by 2.2%. Compared to 2016 income tax revenue, our 2017 collections decreased 2.75%. Ultimately, the 2018 local income tax revenue projection is 1.72% less than actual 2017 receipts.
As previously reported, the second quarter closed with revenues decreasing just 0.52% over 2017. Through the third quarter, we have seen a slight improvement with year-to-date income tax revenues decreasing 0.29% over YTD September 2017. The largest source of the City’s income tax revenue, withholding taxes derived from those individuals working in Dublin, increased 1.23% while business net profits decreased 7.62% and individual returns decreased 3.51%. The total income tax revenue collected through the end of the quarter was $66,987,261.
Actual income tax receipts reflect an increase of $963,012, or 1.46% over the 2018 budgeted amount.
The graph below depicts the City’s income tax revenue through the third quarter of each year from 2014 through 2018.
Property Taxes and Service Payments
Property tax revenue in 2018 increased 11.3% or $403,548 over 2017. The total amount collected was $3,984,361 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 decreased 1.95% over 2017. Total collections for 2017 were $9,015,909.
Important Note: Comparison of March YTD 2017 financial data against March YTD 2016 data may result in inaccurate conclusions. The Department of Finance implemented a new financial system March 1, 2016. The implementation required a ‘black-out’ period at the end of February/early March in which no financial transactions took place, other than payroll. While receipts were deposited to the bank on a daily basis, the entering of receipts and the recording of expenditures in the financial system were delayed. A more accurate comparison should be drawn based on the second quarter information.
Hotel/Motel Tax Revenue
The Hotel/Motel Tax Revenue collected through the third quarter 2018 totaled $1,666,108, which represents a $161,036 or 10.70% increase over collections through the third quarter 2017.
As a reminder, for hotel stays beginning in January 2016, City Council increased the funding provided to the Dublin Convention and Visitors Bureau (DCVB) from 25% to 35% of the actual bed tax revenues. This will need to be kept in mind when comparing the revenue from year to year. The amount for the DCVB is deposited directly into a separate fund established solely for their portion of the tax revenue. Through September 2018, the hotel/motel tax revenue which is dedicated to the DCVB was $897,135, an increase of $105,749, or 13.36% over the third quarter 2017.
Similarly, for hotel stays beginning in January 2016, City Council modified the agreement with the Dublin Arts Council (DAC) which provides that organization with 25% of the actual bed tax revenues as opposed to 25% of an estimated amount. Through September 2018, the DAC had received $510,595 in net revenue (after the deduction for rent and the art in public places program), which was an increase of $63,069 over their payments through the third quarter of 2017.
General Fund revenue totaled $55,588,775 through September. This was a decrease of $31,131,843 or 35.9% over the September YTD 2017 receipts. However, this amount is exacerbated by the revenue from the repayment of an Advance to the General Fund from bond proceeds received in 2017. Excluding the repayment of Advances, the total General Fund revenue totaled $55,588,775, a decrease of $413,343 or 0.74% over 3rd quarter YTD 2018. The total revenue received through the third quarter of 2018 (excluding Advances) represents 74.07% of the total General Fund revenue budgeted for 2018. A breakdown of the revenues is as follows:
While income tax revenue is usually the most influential on the General Fund’s overall revenue position, a decrease in revenue from fines, licenses and permits, charges for services, and intergovernmental revenues contributed to the overall decrease in revenue of the General Fund. Notable variances between the revenue received in the 3rd quarter of 2018 versus 2017 are as follows:
Intergovernmental Revenues – The primary source of this revenue is local government funding, which is based on the general revenues from the State of Ohio.
Charges for Services – The decrease of 17.98% is largely attributable to a one-time payment in the amount of $108,750 received for IT services from Washington Township in 2017. Additionally, revenue from the sale of fuel, including CNG, has decreased. This is a direct result of the cost of fuel being lower than in years past (resulting in a reduction of expenditures as well).
Fines, Licenses and Permits – Much of the revenue generated in this category is a function of development activity throughout the City. The following is a comparison between 2017 and 2018 receipt in this category:
General Fund expenditures through June totaled $72,677,497, which was a decrease of 17.4% or $15,267,863 over the third quarter YTD of 2017.
As reflected in the chart above, the largest expenditure in the General Fund is related to Transfers and Advances. The General Fund subsidizes a number of special revenue funds (Street Maintenance & Repair, Cemetery, Recreation, Safety, and Pool Funds) as the revenue generated in these funds is insufficient to cover the expenditures. These subsidies, completed usually on a monthly basis, are reported as Transfers as there is no intention for the amount to be repaid to the General Fund. Other transfers that occur include the annual transfer to the Capital Improvement Tax Fund pursuant to the City’s General Fund Balance Policy as well as transfers for capital projects. The 2018 transfers include a $4 million transfer for the purchase of the property located at 5555 Perimeter Drive and approximately $1.9 million pursuant to the City’s General Fund Balance Policy (based on the year-end fund balance) (Ordinance No. 02-18).
Advances reflect the amounts temporarily moved from the General Fund to other funds, usually the Capital Construction Fund, to advance fund projects that will ultimately be paid using the proceeds from the sale of bonds or TIF revenues. In 2017, the General Fund had advanced $30,909,900, largely to the Capital Improvement Construction Fund for the cost of the North High Street widening and the Scioto River pedestrian bridge (there were a few smaller advances made to other funds). In 2018, Council authorized an advance in the amount of $18,000,000, which represented the cost of the GMP contract with Turner Construction Company, Inc. for the Downtown Dublin parking garages and associated roadway improvements and landscaping enhancements south of the Grounds of Remembrance. An additional $300,000 has been advanced out to the Riviera TIF funds.
Excluding advances, General Fund expenditures through the third quarter of 2018 were $54,377,497 while expenditures through the third quarter of 2017 were $57,035,460. This is a reduction of $2,657,963 or 4.66%. The amount spent through the third quarter represents 70.88% of the total amount budgeted for 2018 (including carryover encumbrances).
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, 2018, the General Fund balance was $43,201,647, or 54% of the budgeted 2018 operating expenditures (including supplemental appropriations).
As Council is aware, the General Fund advanced money to the Capital Construction Fund in the amount of $18,000,000 for the CML parking garage, roadway system and landscape enhancements (Resolution No. 04-18 approved by City Council January 22, 2018 authorized the construction contract with Turner Construction Company; Ordinance No. 02-18 approved by City Council February 12, 2018 authorized the advance from the General Fund). This advance reduced the General Fund Balance. Had the advance not been done, the General Fund Balance would have been $61,201,647, or 77.1% of the budgeted 2018 operating expenditures (including supplemental appropriations). This advance will be repaid once long-term bonds are issued for this project.