Frequently Asked Questions & Answers
Economic Development and City Finances
Introduction
In keeping with inflationary increases, the City of Upper Arlington’s costs for doing business continue to rise as revenue streams come under threat. As a result, a primary City focus continues to be on seeking ways to enhance fiscal stability to be able to maintain exceptional City services, and find the means to support and facilitate a thriving community over the long-term.
Attention to the community’s infrastructure was not sufficient for many years, and the City is working hard to rectify this situation, at residents request. In order to be able to “do more with less,” the City’s financial policies and fiscal health help the City secure low interest rates when seeking loans, and also guides the City on when it is beneficial to use existing resources or to issue bonds. Much has been done to improve the community’s infrastructure but there are many important projects that must still occur in addition to adhering to a routine schedule of improvements each year.
City policies have been put in place with careful consideration and strong leadership from City Council, residents who have been selected by Upper Arlington voters to represent the community’s interests on their behalf. These policies consider the big picture and plans for the community’s long-term success, and all are in adherence with state and federal guidelines, with the opportunity for community input at all times. While not all policies and special projects will meet with the approval of the entire community, they are put in place for the good of the whole.
The City Finance Department works hard to ensure all financial accounting and policies meet and exceed state and federal standards and requirements. Comprehensive annual audits continue to affirm the City follows all necessary policies and procedures in how it handles public funds. The City and its Staff are proud this has yielded national awards from the Government Finance Officer’s Association year after year.
The City is pleased that residents wish to be involved in the decisions made by their community’s leaders and the role of their local government. We encourage residents to contact members of City Council or representatives at the City with any questions or concerns they may have in order to have a true and complete picture of how the City works for the benefit of us all.
In this section, we include answers to some resident questions about the City’s financial picture, its Economic Development program, and how the two are intertwined. If you have additional questions that you would like addressed by the City, please click here to complete an online email form. Upon receipt of your question, the appropriate department will be asked to provide information that will be added to this section. If you wish to speak to a City representative, please call 614-583-5040.
City Revenues and Fund Balance
Why does the City need additional revenue, since the main sources appear to be strong?
The City’s main revenue sources have remained steady or declined in recent years (income tax, estate tax, frozen Local Government Fund). Property tax millage to the City has increased by just 3/5 of one mill over 10 years, however property value increases has resulted in incremental revenue increases over time. The new State budget is eliminating the personal property tax over three years, which will result in another revenue reduction.
Meanwhile, the cost of doing business continues to rise.
The City’s GAAP General Fund balance at the close of 2004 was $22,180,096, which represents approximately 86% of the City’s annual expenditures. However, this statistic does not take into consideration the portion of funds already designated by the City to support capital improvements and other important projects. The 2005-2006 budget identifies $1 million each year to support capital projects, and an additional $4 million has already been set aside for capital projects or the repayment of debt associated with such projects.
While these monies have been dedicated to capital improvements by City Council and segregated into separate funds, the GAAP form of reporting dictates the classification of “unreserved” for such monies.
Why does the City issue bonds to fund capital improvements?
The City uses a variety of approaches to fund capital improvements. Thanks to prudent financial management that has resulted in an excellent financial rating, and an established Debt Policy, the City is able to do more with available resources. The Debt Policy criteria are used to determine when to fund special projects using existing reserves or by seeking loans, and the City’s Aa1 financial rating from Moody’s Investors Services enables the City to secure excellent interest rates when debt is issued.
Explain the Local Government Fund and why it is considered an important component of City revenues.
The Local Government Fund represents approximately 10% of the City’s General Fund revenue and its reduction and/or elimination has been a topic at the State level for many months. At this time, the Fund has been frozen at 2000 levels.
A statutory formula is used by the State to allocate monies to Ohio counties. Franklin County further distributes the funds to local governments by an alternate formula that is based on a community’s population, size and per capita income. The Local Government Fund is not based on need.
Will the estate tax be removed by the State and what is the City’s reliance on this form of income?
The estate tax is under threat as a revenue source, with discussions continuing at the State level. Historically, this form of revenue is unpredictable therefore at budget time, the City maintains conservative budget projections, with unanticipated revenues dedicated to support capital improvements versus funding routine City services.
Explain Ohio Revised Code (ORC) 5705.13A relative to the clause regarding a 5% reserve for municipalities.
ORC 5705.13A allows for 5% reserves when assessing a community’s need for inside property tax millage. It is not a restriction on unreserved fund balances that a municipality can keep.
Where do my property taxes go?
Of the property taxes paid by residents, approximately 10% becomes City revenue, which translates to 6.86 mills. Of this amount, 3.9 mills is designated to support General Fund operations, .5 mills is designated for capital needs, 1.8 mills supports the Police and Fire pensions, and .66 mills is dedicated to debt payment.
Economic Development
Why does the City need redevelopment or additional businesses?
Income tax represents a significant portion of the City’s revenues, and an area the City can work to enhance. With few parts of the community dedicated to commercial activity yet a strong desire to remain primarily residential, the logical answer is to seek redevelopment within the existing commercial districts that will make the most of the land available, allow for new business and boost income tax revenues.
The fact that the City experienced only slight declines in its income tax revenues during an economic downturn, when other communities saw significant revenue losses, speaks to the value of the program that is in place.
Why invest in an economic development program?
The economic development program is helping to diversify the City’s commercial tax base, so that it is less reliant on a few large companies.
New businesses given City incentives from 1999 through 2004 have to date generated $1,240,958 (includes real property tax, employee withholdings and company net profits). There are grants/loans or abatements attached to these projects, but these are one-time or fixed-life costs that will be recovered by the companies’ presence in the community over the long-term.
Economic development is a long-term proposition for a community that, by its nature, requires financial and human resources to set direction and provide the tools necessary for successful implementation.
Is the Master Plan’s projection of redevelopment in all the commercial districts realistic? Would such redevelopment boost City income or be a drain on resources?
The Master Plan proffered scenarios for redevelopment across all commercial districts in the City, recognizing these were examples only and that any future redevelopment projects would be subject to market costs and demands, a determination of what/if any City participation would be required and other factors.
Market studies support the potential for additional office users in Upper Arlingotn. Most recently, the Retail and Office Market Analysis study conducted by Boulevard Strategies for the City found that Upper Arlington is poised to take advantage of favorable submarket conditions, with a vacancy rate less than half of the region's office vacancy rates and above-average rents.
Undertaking regular studies of the Upper Arlington market can help determine if City goals are on track and indicate as/when adjustments to Master Plan goals might be necessary.
Why has no significant progress been made with redeveloping Kingdale and what would the City’s role be should such redevelopment move forward?
In order to successfully redevelop Kingsdale, a private/public partnership will likely be the only way to succeed. Private developers have been and continue to express interest in the site but without reaching a successful conclusion with the property owner for numerous reasons.
The City continues dialog with the property owner and prospective developers in the hopes it can help facilitate change that will be of benefit to the entire community on many levels.
General Questions
Will high taxes and high interest rates depress the housing market and result in declining property values in Upper Arlington?
Historically, Upper Arlington property values have continued to increase during both times of low interest rates and rising rates.
Is the City growing financial reserves to build a community center at Kingsdale?
No. As previously stated in the financial section, a significant portion of the General Fund balance is earmarked over the next several years to support capital improvement projects.
June 30, 2005
City of Upper Arlington
3600 Tremont Road
Upper Arlington, Ohio 43221
Phone: 614-583-5040
Fax: 614-457-6620
www.ua-ohio.net
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