Worthington continues to maintain exceptional financial health with a AAA credit rating from S&P Global, though City Manager Robyn Stewart and Finance Director Scott Barter warned of emerging challenges that will require careful budget management in coming years. The city finished 2024 with $31.5 million in general fund cash, representing 88% of prior year expenditures, well above the city's target range of 35-50%.
Revenue Outlook: Mixed Signals
Income Tax Strength Continues but Faces Headwinds
Income tax collections have surged 32.5% since 2020, growing from $26.5 million to $35 million in 2024 without major annexations or new large employers. The growth stems from existing employer success and work-from-home arrangements that have benefited Worthington's tax base.
However, several challenges loom:
- Major employer departure: One of the city's top three employers will relocate in mid-2026 when Worthington Steel moves out of the Worthington Enterprises building as part of a corporate restructuring
- Declining withholding: Despite overall collection growth, withholding taxes (75% of total income tax) are down 2.5% year-to-date
- Return-to-office trends: State and federal government mandates for office returns could impact the work-from-home revenue boost
For 2026 planning, staff anticipates a more modest 3% income tax increase compared to the 6.35% boost budgeted for 2025, with future years projected at 2% growth rather than the previous 2.5% estimate.
Other Revenue Bright Spots
Parks and Recreation revenue is exceeding estimates by 40%, leading to a proposed increase from $2.4 million to $2.8 million for 2026. Investment income remains strong at over 4% returns through the State Treasury Asset Reserve (STAR Ohio), with the city on track to exceed $2 million in interest income again.
Expenditure Pressures Mount
Personnel Costs Dominate Budget
Personnel and related expenses represent 75% of general fund expenditures, creating significant budget pressure as costs rise:
- Double-digit health insurance increases expected through the Central Ohio Health Care Consortium
- SAFER grant expiration in August 2026 will require decisions about three firefighter positions added through federal funding
- Contract obligations with police through 2027 and firefighters through 2026 provide cost certainty but limit flexibility
Infrastructure and Equipment Challenges
The Capital Improvement Program faces mounting pressures from:
- Rising project costs across all categories, from water lines to vehicles
- Extended delivery times particularly evident in fire truck purchases ordered 18 months ago still in production
- Tariff impacts already appearing in city purchases, including recent fire hose procurement
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Strategic Financial Management
Fund Balance Policy Triggers Review
The city's strong fund balance above 50% of prior year expenditures triggers a policy-required discussion about potential one-time investments. The city has already allocated $4 million in cash to reduce the pool project's bond financing burden and made strategic transfers to other funds including $500,000 annually to the Capital Improvement Program through 2029.
Maintaining Service Quality
City leaders emphasized that strong reserves provide flexibility to weather potential revenue downturns without impacting services. The 80-20 split of income tax between general operations and capital improvements has remained stable, though recent transfers from general fund cash have supplemented capital funding as infrastructure needs have grown.
Emerging Priorities
Service Coordinator Expansion
Council expressed strong interest in expanding the part-time service coordinator position that has successfully connected residents with supportive services while reducing emergency service demands. The program's proven return on investment through reduced emergency calls makes expansion attractive despite budget pressures.
Inclusive Playground Investment
Council member Herman highlighted the need for inclusive playground equipment that serves children with and without disabilities, noting this represents a higher cost but important community value.
Looking Ahead
The 2026 budget development process begins in earnest during August recess, with the proposed budget scheduled for October 6 distribution. Key considerations include:
- Balancing revenue uncertainty with service level expectations
- Evaluating ongoing commitments carefully given potential income tax volatility
- Leveraging strong reserves strategically while maintaining fiscal prudence
- Incorporating housing and sustainability initiatives within financial constraints
The city's AAA credit rating reflects its conservative financial management and strong operational practices, including annual audits, comprehensive financial reporting, and transparent budget processes. This strong foundation provides options for addressing challenges while maintaining Worthington's reputation for excellent municipal services and infrastructure.
Stewart noted that while the strong reserves can help weather potential revenue downturns, long-term financial sustainability requires balanced incoming revenues and outgoing expenditures, making careful budget management essential as economic conditions evolve.