OHIO Budget quandary puts cities on edge

Most of the problems stem from tax revenue shortfalls, especially after the Sept. 11 terrorist attacks.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- The city is hardly alone in battling budget deficits and cuts to service because of layoffs.
Canton is staring at a $5 million deficit and layoffs.
Lorain continues layoffs from last year and has carried a nearly $2 million deficit each of the past two years.
Parma is borrowing money just to pay its health insurance costs to avoid a deficit and layoffs. Even then, that city could face a $2.5 million deficit in 2003 if workers get raises.
Each city is about Youngstown's size. Each faces similar financial problems.
Monday, there will be 60 fewer Youngstown employees reporting to work -- 15 firefighters and 11 police officers among them -- because of layoffs. Almost 50 other workers took a $10,000 incentive earlier this summer to leave the payroll for good.
City officials blame slumping tax revenues for a roughly $2 million deficit that isn't expected to evaporate until the end of 2003, assuming the economy doesn't worsen.
Financial conditions today across Ohio are mixed at best for small- and medium-sized cities, said John Mahoney, deputy director of the Ohio Municipal League.
Some cities similar to Youngstown, such as Springfield, are surviving. Others, such as Lorain, are struggling mightily.
Economic downturns tend to more drastically affect the cities that traditionally struggle, Mahoney said. Those cities have a harder time building surpluses when times are good and it doesn't take much of a problem to send them back into financial trouble, he said.
'Bad time'
Even Springfield is teetering. A once $3 million surplus is cut in half, income tax revenue is flat and a major employer slowly is reducing its work force.
Still, Jackie Jaudon, Springfield's finance director, considers the city fortunate because there aren't deficits or layoffs.
"It's just a bad time. It's just that way everywhere," she said.
Youngstown Councilman Artis Gillam Sr., D-1st, returned last week from a conference of the National Black Caucus of Local Elected Officials, where he is an executive board member.
Every mayor and council member that he talked with from cities nationwide with between 42,000 and 75,000 residents has financial problems, Gillam said.
Most of the problems stem from tax revenue shortfalls, especially after the Sept. 11 terrorist attacks.
"It made me feel we definitely aren't alone," Gillam said.
Like the other cities, Youngstown tried to avoid the crunch but was undone by job cutbacks in private industry.
The city reduced its expenses, such as travel and overtime. However, health insurance and wage costs went way up and income tax revenue went flat because of job loss.
The private prison and Tartan Textile closed; Youngstown Sinter and other steel-related jobs disappeared; Merrill Lynch went to the suburbs. The recently announced closing of Phar-Mor's headquarters hasn't even been factored in.
In other cities
The story is the same in other comparable cities.
At one time, Canton had a $7 million rainy-day fund, said Richard Gatien, director of budget and management.
Then health insurance costs skyrocketed, the city lost 400 high-paying steel-related jobs and a printing plant, and revenues went flat. A freeze in state aid and low interest rates compounded the problem.
Now, most of the $7 million is gone and the city is talking with unions about concessions. Recovery in Canton from a $5 million deficit isn't projected until 2005, Gatien said.
"We're right on the edge of making some final decisions. I'm certain in my own mind that layoffs will be part of that. It's just how many," he said. "The economics have forced that decision making."
In 2001, Lorain laid off eight firefighters (six remain on furlough) and is down a dozen police officers through layoff or attrition. That city still ended the year with a $1.7 million deficit, said Auditor Ron Mantini.
He described Lorain as living paycheck to paycheck.
The main reason is that one major employer closed, eliminating 800 jobs; another company closed at a loss of 350 jobs. The city expects to have a $1.8 million deficit this year, Mantini said.
Lorain lawmakers tried to reduce an income tax credit to generate more revenue. The city would have collected more income tax from people who live in the city but work outside its boundaries. The mayor, however, vetoed the move.
What's being tried
A quarter-percent income tax is on the fall ballot but passage doesn't look good, Mantini said.
"We're not sure where all the money is going to come from," Mantini said.
Parma is boosting income tax revenue, borrowing money and making one-time transfers to stay afloat.
Unlike Lorain, Parma did cut its income tax credit in half to generate more revenue. That helped end the year without a deficit, said Auditor Dennis Kish.
Parma also switched $2 million in costs in 2001 and an additional $2 million in costs in 2002 from the city's general fund to the capital improvement fund. That was done to stay out of deficit, Kish said.
The city's $1.5 million surplus is down about two-thirds to keep the budget balanced, too, he said.
Nonetheless, labor contracts expire soon and raises for workers in 2003 easily could leave the city with a $2.5 million deficit, Kish said.
rgsmith@vindy.com