Solon Income Taxes Show Signs of Growth

In 2010, Solon’s income tax collections were the lowest they’ve been since 2006 and the Great Recession.

Then they grew 12.4 percent from 2010 to 2011.

“In 2011, it made a huge jump upwards, so that meant the employer base from a withholding standpoint had experienced some recovery,” finance director Dennis Kennedy said.

Kennedy attributes that recovery in part to the city’s strong industrial base. That and a somewhat economically stronger residential base has helped the city weather the storm.

“All things being the same, you can see we’ve rebounded a little bit from the results of the recession that hit late in 2007 (and) carried through 2008 and 2009,” said Kennedy, who started in Solon in October 2011.

Total income tax collections were about

• $37.8 million in 2008,
• $34 million in 2009,
• $35.8 million in 2010 and
• $39.5 million in 2011.

As of June 30, the city has collected $20.6 million of a predicted $38 million in income tax for 2012.

Kennedy said the city isn’t predicting the same success for this year, but so far 2012 is about $600,000 better than expected.

“We think we’re doing fine for the moment and should meet the $38 million projections if not go over,” he said.

That’s good news for Solon, as income tax collections are the largest revenue source for the general operations fund. One percent of the 2 percent income tax rate goes toward the general fund. The remaining 1 percent is divided and dispersed into the capital projects budget and safety budget, which supports the police and fire departments.

Income tax revenues account for about $19 million of the roughly $35 million general operations fund.

At least 70 percent of income tax revenues the past several years in Solon come from employee paycheck withholding tax. Withholding tax grew in 2006 and 2007, leveled off in 2008 when the recession hit and then started a downward trend.

“As you can see, in 2009 it dropped — there were companies that had either frozen wages or laid people off and the gross payroll for the city was substantially lower,” Kennedy said. “It took until 2010 to kind of get back on track to where it was.”

Kennedy has seen a similar tax collection rebound for residents who work in other cities and businesses that pay taxes on their net profits.

Economic development manager Peggy Weil Dorfman said she doesn’t think the city really lost business during the recession — except maybe for one small- to medium-sized business that closed.

“I think primarily what we saw here were cutbacks in existing businesses as far as employment,”  Weil Dorfman said. “But the businesses remained, which was a good thing because once things started to rebound the hiring picked up again.

“If your companies remain here and they are relatively healthy but they have to pare back, that is a decision for the businesses to make,” she said. “There’s not really much the city can do to assist in that area. Basically you just have to weather the storm and keep marketing the city even through the worst of it, and that of course we did.”

It appears to have worked. Weil Dorfman saw some large industrial buildings on the market bought and subsequently occupied — even in the worst of the economy.

Weil Dorfman said her department periodically monitors occupancy rates for industrial land, the city’s bread and butter, and commercial/retail properties as an indicator of local economic health. In general, an 8 percent or 9 percent vacancy rate is considered pretty healthy.

“Overall, the theme would be the vacancy rate in the industrial area remained quite low throughout,” she said. “I think the economy hit much further in the retail area, and the retail area includes small office uses as well.”

Weil Dorfman said not all of that can be attributed to the economy, as numbers were skewed by the high vacancies while the Solon Village, formerly Solon Shopping Center, project was pending.

“Now that that shopping center redevelopment is under way, we’re back down to about 8 percent, so we’re back down to normal range,” she said. “Nonetheless, vacancy rates in retail were higher than we had seen in awhile.”

Industrial vacancy rates were about 6.5 percent in 2007, 6.3 percent in 2008, 6.8 percent in 2009, about 7.2 percent in 2010 and 2011 and about 7.5 percent in 2012.

Commercial/retail vacancy rates (which includes office space) were almost 7.8 percent in 2007, 10 percent in 2008, 11.6 percent in 2009 and 12 percent in 2010 and 2011.

“We are seeing a surge of retail activity, and I think that will continue,”  Weil Dorfman said of Solon Village. “I think we’ll have some spillover effects in other areas of the city. In the last year, we’ve seen some new stores come in (and) restaurants, and that’s an area that we had not seen a lot of activity in Solon for many years.”

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