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Financial OverviewCity of Columbus 2008 Budget 3-1
Financial Overview
The city’s return in 2007 to a very modest growth rate of 4 percent in income taxrevenue, after a robust growth rate of 6.6 percent in 2006, has led to challenges inpreparing the 2008 general fund budget. These challenges have beencompounded by essentially flat property tax receipts, reduced state revenuesharing funds in major part attributable to a decline this year in estate taxreceipts, and a projected decline next year in investment earnings.
The city’s most important revenue source, the income tax, represents nearly two-thirdsof the revenue supporting the general fund operating budget. It is by far the main driverof the condition of the general fund budget. For the 40 years prior to 2001, annualgrowth in the income tax never fell below 4 percent and averaged 6.25 percentthroughout the 1990s.The second and third largest revenue sources are state revenue sharing funds (fromvarious state taxes that are shared with local governments) which represent nearly 9percent and property taxes which represent just over 8 percent of the general fundrevenue total. Investment earnings in 2008 represent 4.34 percent of general fundrevenues.As can be seen in Chart A below, these four revenue sources account for 85.2 percentof all general fund revenues available in 2008 for city operations.
Chart A2008 General Fund Revenues = $634.4 Million
Income Tax, $406.1Shared Revenues, $55.4Property Tax, $51.3Charges for Service, $48.1Fines & Penalties, $21.4Investment Earnings, $27.5All Other, $24.6
In Millions
 
 
Financial Overview3-2 City of Columbus 2008 Budget
Income tax history can be seen in Chart B, below. The growth rate for the income taxfell to 3.5 percent in 2001 and then dropped precipitously in 2002 and 2003, growing notat all over those two years. Positive growth returned in 2004 and 2005, although at a low3.4 percent and 3.7 percent, respectively. However, 2006 saw a significant rebound ingrowth to 6.6 percent. Unfortunately, income tax growth in 2007 since the end of thefirst quarter has been running between four and five percent and is currently projected tobe four percent at year-end. Each one percent decline from 2006 represents $4 million inlost revenue.
-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%
* Excludes '83 and '84 growth rates of 36.5% and 15.3%, respectively, due to tax rate increase effective 1/1/1983.Red bars reflect the Auditor's original estimates for 2007 and 2008.
Chart BAnnual Income Tax Growth: 1975-2008
% Growth8.7%7.1%6.1%6.4%3.5%-0.3%0.3%3.4%3.7%6.6%3.9%4.0%3.75%75-85*86-9091-9596-0001020304050607Orig07 Est08 Est
 The estimated income tax growth rate for 2008 is a conservative 3.75 percent, whichwould yield a total of $406.1 million.Relative to the other important revenue sources discussed above, namely state revenuesharing funds (including estate tax), investment earnings and property tax, the situationhas varied.Due to state budget difficulties, the portions of state revenue sharing funds known aslocal government funds were reduced then frozen for the last six years with the cityreceiving about $47 million per year since 2002 (after a high of $51 million in 2001). Thefreeze continued through mid-2007 with the biennial state budget now providing for anend to the freeze and a new system of distributing a portion of state revenues to localgovernments that may result in a slight increase in funds in 2008.However, a significant part of state revenue sharing has been estate tax receipts whichin some years have contributed as much as $12 million to general fund revenues.Receipts have declined in recent years, as seen in Chart C below, with these revenuesprojected to be as little as $6.5 million both this year and next.
 
Financial OverviewCity of Columbus 2008 Budget 3-3
Chart CEstate Taxes, 1998-2008
02,0004,0006,0008,00010,00012,00014,000
1   9   9   8   1   9   9   9   2   0   0   0   2   0   0   1   2   0   0   2   2   0   0   3   2   0   0   4   2   0   0   5   2   0   0   6   2   0   0   7   2   0   0   8   
        0        0        0        '      s
 Receipts from investment earnings were as high as $29 million in 2001 but declined to alow of $5.5 million in 2004 after the recession. Since the 2004 low, earnings reboundedto $10.2 million in 2005 and then $20.4 million in 2006. They are expected to reach$31.3 million in 2007, a new high. However, the projection for 2008 is a decline back to$27.5 million, removing $3.8 million from the pot of general fund revenues supporting the2007 budget. This source is dependent on interest rates and cash levels in the citytreasury, and its significant fluctuations (see Chart D below) can cause problems inproviding reliable and consistent support for the general fund budget.
Chart DInvestment Earnings, 1998-2008
05,00010,00015,00020,00025,00030,00035,000
1   9   9   8   1   9   9   9   2   0   0   0   2   0   0   1   2   0   0   2   2   0   0   3   2   0   0   4   2   0   0   5   2   0   0   6   2   0   0   7   2   0   0   8   
        0        0        0        '      s
 
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