Brecksville Income Taxes Holding Steady but Feeling Loss of VA

More devastating to the city than the recession has been the closure of the Veterans Affairs Brecksville Campus.

“Probably the biggest hit to us in the last several years has not been associated with the economic downturn but with the federal government decision, that is, to close the VA hospital,” said Frank LaRose, economic development director and state senator. “That’s been a difficult thing for Brecksville economically, but probably most pronounced was the impact it’s had on city revenue as far as tax receipts.”

The was the biggest employer in town.

“We’ve just budgeted accordingly knowing that they were going to close, and we were losing that revenue source,” director of finance Virginia Price said.

Departments have gradually been moved the the Cleveland and Parma locations. A few support staff employees are still there while all the storage and equipment are removed, and Mayor Jerry Hruby expects the facility to close sometime this fall.

Brecksville is still collecting income tax from the VA center, but the money received is a fraction of the $1.2 million to $1.4 million in years past, Hruby said.

The VA center accounted for 14 to 17 percent of Brecksville’s total income tax revenues.

“It is a blow to the city losing that amount of income tax but on the good side it gives us a great economic development opportunity to develop that property,” Hruby said, explaining development is on hold until the VA turns the property over to a developer.

Income tax revenue comprised between 50 percent to 62 percent of Brecksville’s general operating fund. In 2011, Brecksville collected $15.5 million in income taxes and the general operating fund was $25.2 million. The operating revenue supports the service department, police department, human services and administrative support, among other city services.

Income taxes have been levied at a rate of 2 percent since 1989. The majority of income income tax revenues, 79 percent in 2011, come from employee paycheck withholdings.

Income tax revenue will be lower this year, though not as low as Price first thought.

“Our other corporations seem to be doing well,” Price said. “They’re paying well, so they are making up for part of the loss of the VA but not all of it.”

As of June, the city collected about $7.57 million in income taxes and Price is budgeting collections of about $13.1 million total for the year.

Total income tax number revenues for the past four years were:

• $13.7 million in 2008
• $13.2 million in 2009
• $13.7 million in 2010
• $14.7 million in 2011

Price said last year the city collected about $860,000 more revenue than budgeted — a boost that came in part from the VA Medical Center. Additional staff was temporarily moved to Brecksville during construction at the Cleveland facility.

That’s not to say the city hasn’t also affected by the Great Recession. As far as 2007, Price said she saw a drop in revenues.

City officials haven’t had to reduce services but has reduced expenses, $200,000 from 2011 to 2010, through a hiring freeze and attrition. Officials have also tried to improve the maintenance program to increase the life of equipment.

“We have been able to cut a lot of money out of our budget so we are able to live within our means since we aren’t generating the revenues we did before,” Hruby said. “This year will probably be the year we recognize the largest decrease in revenues. We moved around our budget in order to concentrate efforts on most important services: rubbish, police and fire departments, repairing roads and having adequate staff to do the basics. All the other things for the government are secondary.”

Officials are also turning toward economic development. LaRose said Brecksville’s strategy for smart growth has helped the city through the recession and well positioned in the future.

“Brecksville’s not interested in just anybody that wants to be here,” La Rose said. “For example, we’re not interested in big box retail. That’s got a certain burn rate on it; it’s got a life cycle. Twenty years in, oftentimes it’s vacant and abandoned. That’s not what we’re looking for in Brecksville. We’re looking for sustainable long-term growth.”

The city has been proactive about monitoring income tax collections as a sign of that growth. An income tax administrator tracks major businesses payments to see how they’re trending one way or another.

So far this year, “the companies appear to be healthy and withholding is holding its own with the absence of the VA,” Price said.

Editor’s Note: In this series, Patch gauges the recovery of 18 Ohio communities based on income tax receipts since the Great Recession. Read about