Study Reviews Finances & Potential Results of Merger

A Detailed Summary of the Steen Study

A study commissioned by Washington Township provides insight into city and township finances and some of the potential consequences of merger. The study by Steen & Company, a certified public accounting firm from Columbus, reports these findings:

◄ City and Township Assets and Liabilities –

• The city has substantially more debt than the township, approximately $17.5 million compared to $2.1 million.
• The township’s equity position is approximately $9 million more than that of the city as of December 31, 2006. The study places the township’s estimated equity at about $42 million and the city’s at about $33 million.
• The Montgomery County Auditor values the jointly purchased and township-purchased land holdings at approximately $19.9 million, an appreciation of $9.7 million that was not incorporated into the comparison of assets and liabilities.
• Both have sizeable cash and investment balances of about $19 million each and sizeable inventories of capital assets – about $24 million for the township and $28 million for the city.

“If the governments were to combine, a remedy must be developed to balance the $9 million difference in overall equity, as well as the $9.7 million appreciation in land holdings,” the Steen & Company study reports.

The study values Yankee Trace Golf Course at more than $35,000 per acre or approximately $8 million, the value established by the Montgomery County Auditor. The study references the market value of five other Ohio golf courses at $10,844 to $30,518 per acre. The city values the course at $82,000 per acre or about $18.8 million.

◄ Potential Personnel Costs or Economies –

Using data from four peer communities – Dublin, Hilliard, Kettering and Upper Arlington – the study compared per capita spending, per employee spending, and the number of full-time equivalent employees per 1,000 residents.

The study did not find evidence of an “economy of scale” to be gained through merger, nor did the data lead to a conclusion that staffing efficiency or reductions would occur due to increased size. “It can be concluded that as a government’s budget or expenditures increase, it also adds staff at a comparable rate,” the study states.

Peer communities were identified based on recommendations by the city and township. The peer group represents the governments most similar to the city and township if they were to merge. Shared services, housing stock, population and economic base were among the factors considered. Findings included:

• Both the township and the city have fewer full-time equivalent employees (FTEs) per 1,000 residents compared to the peer group. Washington Township has 7.39 full-time equivalent employees per 1,000 residents and the city has 7.99, while the peer group averaged 9.71. When Dublin -- the city with the most FTEs -- was removed from the group, the average was 7.67 full-time equivalents.
  
  
• Both the township and city have lower per capita spending than the peer communities. The peer group’s average per capita spending was $1,236, compared to the city at $923 and the township at $675. Removing Dublin, the city with the highest spending, lowers the peer group’s average to $974 per capita, still higher than Centerville or Washington Township expenditures.
• Both the township and the city spend less per full-time employee than the overall average of $131,564 for the peer group. The township’s per employee spending is about $40,000 below the average and the city’s is about $16,000 below.
  
  
• Kettering , the nearest city to the township’s border, reported per capita spending that was higher than the city or township, and a higher number of full-time equivalent employees per 1,000 residents than the city or township. Its spending per full-time employee was $21,000 higher than the township’s, but slightly lower than the city’s spending.

◄ Potential Income Tax Revenue –

• Additional income tax revenue from merging the city and township was estimated at approximately $1 to $3 million. The “conservative” estimate does not reflect potential income from business activities, rentals, agriculture, etc.
• There are many challenges to estimating income tax revenue. Some residents of unincorporated Washington Township don’t pay income tax; some pay to a municipality at a rate the same or higher than Centerville’s 1.75 percent; and others may pay tax to a municipality at a rate lower than Centerville’s tax.
• Other factors include businesses located within the township that would become subject to a tax on net profits in the event of merger and employees of township businesses who would be subject to income tax.
• The best approach to estimating potential income tax revenue is to conduct a survey of residents and businesses in unincorporated Washington Township.