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Finance briefing: income-tax timing delays $400,000 in residential paving to 2027
Summary
City finance officials told the Committee of the Whole that the shift from property levies to a 2% income tax creates a temporary cash‑flow shortfall in 2026; because of timing and bond-rating carryover requirements, staff cannot recommend earmarking an additional $400,000 for residential paving this year and recommend delaying the earmark until 2027.
City finance staff told the North Canton City Council Committee of the Whole on May 18 that the city’s transition from property-tax levies to a new 2% income tax has created a timing gap that reduces available cash in 2026 despite no permanent revenue loss.
The presenter explained that income taxes are collected in arrears and that 2026 is effectively a "27-pay" year, producing an estimated shortfall of about $555,000 versus what the old levy would have generated in 2026. The presentation also identified a roughly $309,000 one-time pressure tied to the pay-period transition and the city’s first large debt payment for the new fire station.
"It's just a cash flow issue. It's not lost. It'll it'll come over time," the chair said in summarizing the finance briefing, describing the shortfall as timing rather than a permanent decrease.
Finance staff and councilmembers said the city held about $1.6 million in carryover from 2024 that helped support the city’s bond rating during debt issuance for the fire station. Staff said S&P Global and the bond consultants recommended maintaining a higher carryover percentage to secure a favorable financing rate for the city’s new debt.
Because the higher carryover was retained to protect the bond outcome and because of the timing lag on income-tax collections, finance "cannot recommend an earmarking of the additional $400,000 for street paving in 2026," the director explained. Councilmembers were told the $400,000 commitment remains part of a four-year plan but that the first disbursement is expected to be delayed until 2027 in the capital improvement plan.
Several councilmembers and speakers pressed for clearer public communication around that change. "I don't wanna lose sight of that part of it because it's very important to people to understand that we're gonna give them that information when we learn it and not 8 months later," one committee member said, urging earlier notification to voters when timelines shift.
Council and staff also discussed how routine maintenance (pothole repair, crack sealing) is ongoing and how larger projects are budgeted separately, often as grant‑matched work. Staff proposed tracking the paving commitment on a quarterly basis so council and the public can monitor whether the plan resumes on schedule.
Next steps: staff will include the $400,000 in the capital plan beginning in 2027, provide periodic updates to council, and deliver the forthcoming water/sewer rate study to the council next month.
