Roads, Infrastructure, & Income Tax 

City Council approved legislation to reduce the allowable municipal income tax credit for taxes paid to other municipalities from 1.50% to 0.50% beginning January 1, 2027, under the authority granted to Council under Ohio law.

• This reduction in the income tax credit would generate the revenue needed to fix and maintain our roadways and infrastructure.
• Lowering the credit from 1.5% to 0.50% provides for residents who work outside Avon Lake to contribute to the improvement and maintenance of the roads and capital infrastructure all residents use and rely upon. 
• A minimum of 70% of the revenue generated by the income tax credit reduction will be dedicated to fixing and maintaining city roadways. A maximum of 30% will be dedicated to paying costs of constructing storm sewers and related drainage improvements, installing traffic signals and signalization, and acquiring vehicles and equipment for city departments and functions.

• The cost of road repairs continues to rise year after year, while our income tax structure hasn't changed in more than 30 years. We need to align City revenue with today's costs in order to fix our roads, manage our stormwater, and maintain the City services that make this community a great place to live.
• Many of our roadways are in need of costly repairs or replacement. We can no longer afford to defer necessary road repairs and maintenance. The longer we wait, the more our roads decline and the more expensive it becomes to fix them. Learn more about the condition of roads. 

If you live in Avon Lake but work in another city, your income tax dollars likely go to the city where you work and NOT the city where you live.

Why? Because Avon Lake has a 100% income tax credit factor and a 1.5% credit rate that has been in place for more than three decades. That credit allows residents who work in other cities to reduce or eliminate the income tax owed to Avon Lake based on taxes already paid to their city of employment. 

• If the city where you work has a tax rate equal to or greater than Avon Lake's 1.50% income tax rate, all of your income taxes go to that city and nothing comes home to Avon Lake.   
• Currently, approximately 25% of working residents who live and work in Avon Lake pay income taxes to support the local services they use every day, while 75% of working residents who work in another city pay $0 in income tax to Avon Lake. 

A city's tax rate sets the base tax. The credit factor determines what percentage of the taxes you pay to the city where you work can be subtracted from your tax obligation to the city where you live. Here is how Avon Lake's income tax rate and tax credit compares to other nearby communities (source: Regional Income Tax Authority):

Lowering Avon Lake's income tax credit from 1.5% to 0.50% allows residents who work outside our city to contribute to the improvement and maintenance of the roads and capital infrastructure all residents use and rely upon. 

The City's General Fund is funded through a combination of revenue sources. The City uses the General Fund to pay for critical services like police, fire, public works, parks, etc. We do not currently have a dedicated fund for capital needs (e.g., road improvements, stormwater management). 

• Municipal Income Taxes account for approximately 62% of City revenue. Since 1992, Avon Lake's income tax rate has been set at 1.50% with up to 100% credit for residents who work in other cities. Income tax applies to wages and business profits. It DOES NOT apply to Social Security, pensions, or retirement income. Voters must approve the income tax rate, while City Council controls the income tax credit.
• Property Taxes (inside and outside millage) is a completely separate tax system from income taxes. Property taxes account for approximately 25% of City revenue. The City of Avon Lake does not set property tax rates. Rates are administered by the Lorain County Auditor under a state formula. The largest share of property taxes goes to Avon Lake City Schools.
• Other Sources such as various fees, other taxes, federal and state grants, account for approximately 13% of the City's revenue. 

In addition to our roads and infrastructure,  the taxes you pay to the City of Avon Lake fund safety services (police and fire), our beautiful parks, recreation opportunities for all ages, and much more. 

Increases in property value do not automatically result in proportional increases in City revenue from property tax levies. Under Ohio House Bill 920, when property values increase, the millage rate for voter-approved levies (i.e., outside millage) is automatically reduced so that the levy continues to generate approximately the same dollar amount it produced when it was originally approved.

The City's 1.5-mill property tax levy generates approximately $1.1 million annually, which is roughly the same amount it generated when it originally passed in 2000. While there may be a limited increase in property tax revenue from inside millage, the increase doesn't keep pace with rising costs of roads and infrastructure improvements and maintenance.

Over the past 30+ years, Avon Lake has experienced steady growth in population, housing, and commercial development. That growth has increased the City’s overall tax base, but at the same time significantly increased demand for City services.

During that same period: 

• Our population grew by approximately 73% over the past 30 years. While growth has increased the City's total tax base, the increased revenue has simply not kept pace with increased demand for City services and the rising costs of maintaining and improving our aging roads and infrastructure.
• Construction and infrastructure costs have also increased significantly. According to national transportation data, construction materials and labor costs increased approximately 54% between 2022 and 2024 (source: The Federal Highway Administration, tripnet.org). 
• Since 1992, Avon Lake has had the second lowest income tax rate in Lorain County at 1.5% and has offered a 100% income tax credit. Avon Lake is a bedroom community where the majority of residents work in other cities. Currently, approximately 75% of working residents work in other cities. Because of the 100% income tax credit,  those residents' income tax dollars do not come home to Avon Lake to support our roads and infrastructure needs. 

After more than three decades offering a low income tax rate and a 100% income tax credit, the City now faces an estimated $48 million backlog of necessary road improvement costs. Those costs will only increase the longer our roads are not addressed. 

The City has taken key steps to manage costs and limit the need for new revenue:

• Reduced operating budgets. 
• Limited overtime spending. 
• Initiated steps to reduce healthcare costs. 
• Pursued grants and other external funding sources. 
• Creating an economic development strategy in collaboration with the ad hoc Lakefront Futuring & Investment Committee. 

The City has managed your public dollars responsibly, as evidenced by a decade of awards received from the Government Finance Officers Assocation (GFAO) for excellence in financial reporting. We will continue to pursue economic development, cost savings and alternative funding solutions, while at the same time recognizing that these efforts alone do not bridge the funding gap to improve and maintain our roads and infrastructure.