New projections for Cincinnati's income tax revenue over the next few years are more optimistic than previous reports. The UC Economics Center presented a new tax forecast to Council's Budget and Finance Committee Monday.
The city's General Fund is expected to grow about 1.7% a year.
"Going back to July of 2000 through present, the average growth rates been about 1.9% per year," said Co-Director of Research Chris Nicak. "So we are seeing slightly slower growth in the next five years than we've historically seen, back through the beginning of when the data is available."
There's still a risk that people who started to work from home outside the city will request a tax refund. Council set aside $50 million in federal stimulus to cover those refunds over the next three years.
The new report says the risk is lower than originally thought and the city might not need the full amount.
"We've been benchmarking our consideration of risk to different national forecasts, and we've been pretty consistent in a 16-24% [of earnings tax revenue] potential risk of refunds," Nicak said. "And the 16% risk seems to be pretty likely, currently, looking at differences and refunds historically."
People can retroactively request a refund up to three years later, so the full impact won't be known for a long time.
City Finance Director Karen Alder says it's important to remember the earnings tax isn't just withholdings — it also includes net profits from businesses in the city.
"If you compare this year's numbers to-date to 2019, pre-pandemic, our local business community has had [very good] net profits, and that has really helped to offset some of the loss in withholdings."
But it's not all good news. The city is expected to lose about 1.4% of jobs over the next 10 years, despite a projected increase in the metro area (up 6.7%) and nationally (up 9.2%).
"Typically, the city has a slower growth rate than the region and the nation," Nicak said. "But I believe this is the first time that we're actually seeing negative growth, looking out to 2031."
One area expected to grow is health care, which could help offset the other losses. Some of the area's largest employers are hospital systems and those jobs are not typically done from home.
Generally, however, Nicak says the jobs being added in Cincinnati are lower wage than the ones being lost.
"Education is being more and more required across all jobs, even jobs that don't have that higher rate of return for earnings," Nicak said. "So that is something to consider as well — individuals are taking on debt for jobs that historically they didn't need a college education or degree to do the work."
Millions of dollars in federal stimulus will cover the deficit for the next fiscal year budget, which begins July 1. Interim City Manager John Curp will release the first draft of the budget sometime next week, and Council will have to approve a final version by June 30.
Three public meetings are scheduled:
Thursday, June 2 from 6-8 p.m.
- Madisonville Recreation Center (5320 Stewart Avenue)
Saturday, June 4 from 11 a.m. to 1 p.m.*
- City Hall, Council Chambers (801 Plum Street) and virtual
* A "meet and greet" with council members is scheduled from 10-11 a.m.
Tuesday, June 14 from 6-8 p.m.
- College Hill Recreation Center (5545 Belmont Avenue)
See the full report from the UC Economics Center below:
