Booming business downtown means rising income tax returns

Kelli Fitzpatrick

During the past two years, more than 50 businesses have opened in Kent, Kent Economic Development Director Dan Smith said. With these new businesses come construction and part-time jobs as well as permanent employment.

As these employment rates rise, the city benefits in yet another way from booming business: increasing income-tax collections.

The city’s year-date collections as of Sept. 30 were $9,379,625, a 7.02 percent increase compared with the same period in 2012.

“2012 was a particularly good year for us, and a lot of that had to do with the new employment that came into town,” said David Coffee, director of Kent’s budget and finance. “We’re pleased with the result.”

The Regional Income Tax Agency for Kent does not differentiate types of employment paying tax, but Coffee estimated about 25 percent comes from temporary employment, such as construction jobs.

“New construction income taxes started flowing in with the nearly 1,000 temporary jobs,” Smith said. “Overall, income taxes … are sustaining after the initial construction boom.”

Smith pointed to Davey Tree, MAC Trailer and Smithers-Oasis as “three corporate anchor tenants” whose permanent employment will continue to benefit Kent.

“We’re establishing a new normal because of the new employment we’re seeing,” Coffee said.

Where the tax goes

Kent income tax contributes to a variety of different city department needs.

“The healthy trend tells us that our tax base has grown, which gives the city more resources … that can be used for the community good,” Coffee said.

Income tax collections provide for Kent fire and police departments, which account for 50 percent of the city’s operating budget, Coffee said. He also said collections also go toward city maintenance and repairing of streets and property, water and sewer departments and other city services.

Kent State’s role

Kent State is the largest employer in Kent’s tax base. The 2 percent tax is taken from all university employees’ pay, including from part-time student workers.

Kent State has experienced an increasing trend as well, though at slightly lower numbers. According to the university’s income tax receipts, August collections were $375,619, a 4.5 percent increase from August 2012.

Paula DiVencenzo, tax manager of business and finance in the Kent State AVP Cash Management and Financial Reporting department, said the increase is related to a variety of factors.

“An increase means that the taxable wages increased,” DiVencenzo said. “Taxable wages fluctuate for many reasons, including the number of employees, amount of wages and changes in nontaxable benefits such as health insurance.”

DiVencenzo said all income tax collected from university employees goes to the city of Kent. The university does not use any of the collections.

Looking ahead

Increased collections are exciting, but Coffee said planning and budget committees must “not get carried away with our joy on that,” especially because some of the collection is from temporary employment.

“Based on currently committed construction projects in Kent, this percentage (of temporary work) is expected to become even smaller in 2014,” Coffee said.

But loss of temporary jobs will be balanced by permanent employment and investment, Smith said.

“Given the upward trajectory, we do expect income taxes to maintain into 2014,” Smith said. “Success generates additional success, and Kent’s overall level of business activity encourages additional investment.”

Contact Kelli Fitzpatrick at [email protected].