FIAM USER GUIDE COVER II - Fiscal Impact Analysis Model - OKI

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Fiscal Impact Analysis Model User Guide revenue types and expenditure categories that OKI jurisdictions use are generalized in the Model into a limited number of categories. The use of these categories is intended to accommodate a wide variety of government budget information and to identify revenues and costs by type, not necessarily by each item that may be found in a local government’s budget. Revenues Revenues in the Model are limited to those taxes and fees that the local government is empowered to collect by state law, charter, enabling legislation or local ordinance. Revenues are sources of income that a jurisdiction receives through the levying of taxes, charging for various public services the municipality or township provides, levying fines and fees, and other methods of generating income that allow the local government to operate. In order to calculate potential revenues from development scenarios, existing information on revenues is needed. Both community specific revenue information and outcomes from model analysis are accommodated through the same revenue types (or categories). Based on the government structure and other factors, potential revenue types include the following: • Real Property Tax (and other taxes). Property taxes, payments in lieu of taxes and other property-based revenues as defined in local budgets are included in this revenue item. Classification of revenues as property taxes is based on local Comprehensive Annual Financial Reports (CAFRs), audit reports or financial reports. Specific procedures for levying real property taxes vary by state, but the process generally involves the application of a property tax rate against the property’s assessed value, which may be adjusted by state or local law to reflect ownership or land use considerations. The Model addresses adjustments by using net “effective” tax rates for each jurisdiction, which account for the value of adjustments within the rate. In Ohio, two different effective tax rates are usually applied by the County Auditor: one rate for residential or agricultural land uses, and one for commercial or industrial uses, reflecting differences in assessment adjustments between these two categories of land use. The rates used in the Model are not inclusive of any taxes levied from other taxing bodies, such as schools or special districts, but only include tax rates imposed by the specific jurisdiction. Ohio’s real property assessment ratio is 35%. Indiana and Kentucky’s ratio is 100%. These differences are also reflected in the Model. 6
Fiscal Impact Analysis Model User Guide • Income or earnings tax and occupational license tax. Many jurisdictions in the region collect a tax on income or total earnings. Ohio municipal legislative authorities may levy, without vote of the people, an income tax of up to 1%. Kentucky cities and counties can levy occupational license taxes on wages, salaries, commissions, and other compensation received by individuals. In Indiana, different local income tax rates may be applied to those who live inside and outside of the jurisdiction. These taxes may or may not include a cap. Each participating community collecting income tax submitted detail on the percentages of the total income tax revenue that was made up from withholdings (employed labor), net profits (corporations) and individuals (self employed labor). These differences are reflected in the Model. Some jurisdictions have reciprocity agreements, in which the taxpayer is not liable to her or his home jurisdiction for the amount of taxes paid to the work jurisdiction. As a result, the Model’s income and earnings tax calculations account for three types of individual taxpayers, in addition to corporate tax liabilities: • People who work and live in the jurisdiction. • People who live in the jurisdiction but work elsewhere. • People who work in the jurisdiction but live elsewhere. • Sales and Estate Tax. Some jurisdictions in the OKI region levy sales tax and estate tax. Sales tax is calculated as a percentage of the total cost of a good or taxable service. This percentage is added to the cost of the purchase. There are no local sales or use taxes in Kentucky or Indiana. Ohio counties may enact up to 1% sales and use tax, in 0.25% increments, for use by the county general fund. Estate taxes are levied on inheritances that exceed a certain statemandated total amount. Estate taxes are generally due to the jurisdiction where the decedent lived. Since the amount of estate tax collected per year is entirely dependent upon the number of residents dying in a specific year with net worth sufficient to trigger the estate tax, many jurisdictions do not include estate taxes in their revenue estimates. Where applicable, these revenue types are reflected in the Model. • Licenses and Permits. Depending on the jurisdiction, license and permit fees may be associated with vehicle registration, animal registration, liquor licenses, building permits or other licenses and permits. License fees are established on a October 2009 7
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FIAM USER GUIDE COVER II - Fiscal Impact Analysis Model - OKI

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