Cutting the city’s business privilege tax would help attract new business enterprises. Unfortunately, that action would not guarantee the increased investment that the city would need to keep the municipality’s financial dilemma from becoming much worse.

City officials must move cautiously on this idea, but they should move nonetheless to make the city more competitive with neighboring municipalities. The key issue is that a new source of revenue would need to be identified and implemented immediately to make up whatever revenue would be lost by way of the business privilege tax reduction. Making up the revenue lost in a tax reduction, keeping the tax change revenue neutral, won’t be easy.

The city already has displayed an inability to find new sources of money for its beleaguered budgets.

The municipality’s tax options are virtually tapped out, and the city already is flirting with the possibility of having no choice but to go under the unbrella of state fiscally distressed status.

Even if the city only were to implement the first year of a proposal to reduce the business privilege levy by three steps over three years, the city would need to find $825,000 during the first three years that the reduction was in effect to make up the money that would be lost — about $275,000 each year.

The way the tax-reduction proposal has been proposed, the city in 2012 would reduce by 2 mills the current 7-mill tax on gross income earned by city businesses. Beginning in 2013, the tax would be stepped down to 3 mills, and then, in 2014, to 1.2 mills.

Once the reduction was fully implemented, the remaining 1.2-mill tax would earn the city about $177,000 annually, compared with the $1 million that the tax now brings in each year.

If the tax reduction realized the sought-after goal of attracting a number of new or relocated businesses, the negative impact of the tax reduction would be lessened. The city would not need to make up as much money as if the tax reduction brought about no new business openings.

City Councilman Joseph Bratkovich, who is the city’s finance director, put the tax-reduction issue in the right perspective, saying, “It sounds good as an idea, but if it’s not revenue neutral, it would be hard for us to go through with it.”

Unfortunately, there’s no way to make the proposal revenue neutral immediately without another source of money. Until there were new businesses in place to pay some or all of the tax revenue that would be lost by way of the millage reduction, the city would need alternative sources of money — or budget cuts — to keep outgoing and incoming revenue balanced.

With the current 7-mill business privilege levy, the city is at a disadvantage in luring new enterprises. Nearby municipalities have business privilege taxes as low as 1.25 mills or no tax at all.

There’s also the issue of new businesses eyeing locations outside the city because of parking issues.

Therefore, all considered, the lower-business-privilege-tax idea might end up as just another idea that gathers dust because of the challenges associated with it. However, city leaders and others with the municipality’s best interests at heart should not abandon the idea without exploring all possibilities — including implementation of the tax reduction over a longer period of time.

The 7-mill levy has been a turnoff for some who have considered opening a business in the city. But for now at least, the prospect of not having some or most of the revenue that the 7-mill levy generates could have disastrous implications. Or, it could provide more motivation for city officials to find ways to cut expenses.

The city council must look long and hard at this issue before agreeing to officially embrace it and voting to implement it.