CINCINNATI -- When Cincinnati's city manager unveiled his proposed budget Thursday, it relied, partly, in growing income tax revenue to cover a projected shortfall.
A draft report from the University of Cincinnati's Economics Center released late Friday shows exactly how much researchers expect the city's income tax, its largest source of revenue, to increase in coming years.
The proposed budget for fiscal year 2017 counts on a 3.3 percent increase in income tax, instead of the earlier projection of 2.8 percent. That's what UC's economic researchers outlined in their draft report, and city officials believe it's a conservative estimate, since this year the tax revenue was up 4.6 percent.
Then, in 2018, the city's income tax revenues are projected to grow by 5.6 percent, and finally by 2.1 percent in fiscal years 2019 and 2020.
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Over five years, it should average out to about 3.2 percent a year, UC's Economics Center found, or 1.7 percent accounting for inflation. A more optimistic forecast would put growth at 4.2 percent a year, or 2.8 when taking inflation into account. Under the more optimistic forecast, the city could see $82.7 million in extra revenue to its operating budget over the next five years.
UC's researchers found city income tax collections, on the whole, have grown by nearly 30 percent in the past decade. Payroll tax withholdings have consistently grown and are expected to continue rising by about 2.8 percent a year; business income taxes, on the other hand, have been more volatile, still averaging 6.4 percent growth a year since 2005.
In a memo to city council, City Manager Harry Black cautioned that, because it's a draft report, the final analysis could change. He expected to present the final report to city council's Budget and Finance Committee on May 31.