Background
The City of Columbus has a proud legacy of strong fiscal stewardship. The long-standing practices of setting aside 25% of the city’s income tax proceeds for debt service and the limiting use of a coverage ratio are hallmarks of sound financial management, and the city’s credit rating reflects the belief by those ratings agencies that our fiscal conservatism will keep the city stable and secure.
However, since the code revision that created the Income Tax Set Aside fund (ITSA) was enacted in 2019, the city has seen an increasing reliance on the use of these funds for ongoing operating expenses. Rather than dedicating 25 cents of every dollar to debt service and capital planning, that amount has continued to decline as direct expenses out of ITSA consume an increasing share of the revenue.
This practice has two severe downstream impacts. First, it potentially places the city’s credit rating at risk. The use of what is considered a reserve fund for ongoing operational expenses is inconsistent with generally-accepted accounting standards; rather, annual operational expenses should be supported by more appropriate funding sources. Second, the use of cash within ITSA for direct expense, rather than on debt service, inhibits the city’s ability to more effectively manage its capital portfolio. Utilizing cash from the Income Tax Set Aside fund mitigates the city’s ability to more aggressively pay down outstanding debt or to service additional debt through the capital portfolio.
To that end, this code change will effectively establish a ceiling for direct expense out of ITSA, the purpose of which is to steadily and consistently reduce what Council deems to be an inappropriate use of these funds.
Fiscal Impact: None.
Title
To amend Chapter 362 of Columbus City Codes on the use of the Income Tax Set Aside subfund. ($0.00)
Body
WHEREAS, the long-standing practices of setting aside 25% of the city’s income tax proceeds for debt service and the limiting use...
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