SHARON City faces a bleak financial outlook

It took years for the city to get into this predicament and it will take years to get out, the mayor said.
By HAROLD GWIN
VINDICATOR SHARON BUREAU
SHARON, Pa. -- The city started 2002 about $865,000 in the hole, but Mayor David O. Ryan said refinancing an old bond issue should cut that red ink to $610,000 by the end of the year.
Ryan and city Finance Director Michael Gasparich outlined Sharon's financial outlook Monday.
It isn't pretty.
"This deficit condition did not happen overnight, or just in the 2001 calendar year, but is an accumulation of less-than-adequate funding over probably a five- to 10-year period," said Ryan, who took office in January.
Inflation impact
Funding hasn't kept pace with inflation. "What we are actually doing is attempting to operate the city in 2002 with funding sources comparable to 1994 or 1995," Ryan said.
The mayor has cut all city spending to a minimum, but he said he needs support on a bond refinancing plan that council will vote on Wednesday.
The city will save $327,000 this year by borrowing $4 million to refinance an old bond issue, Ryan said. That includes interest savings and the elimination of a November bond payment. The actual proposed bond issue is $6.1 million and includes about $2 million to finance some capital improvements.
The savings realized by refinancing, along with $28,000 in spending cuts so far this year, will reduce the red ink by $255,000 and allow the general fund to pay back $100,000 of the $1 million it has borrowed from the wage tax office over the past several years to keep the doors open, the mayor said.
Fragile situation
Unpredictable events such as big snowstorms or fires that use up overtime could wreck the plan, he acknowledged.
"This problem was not created in one year and cannot be corrected in a year. I project it will take four or five years ...," Ryan said.
Ryan said the city carried over $486,000 in bills from 2001, but the 2002 budget set up by former Mayor Robert T. Price and approved by city council didn't provide money to cover them despite a 3.5-mill property tax increase.
That tax increase was just enough to cover 3 percent employee wage increases and normal inflation in a $7.9 million general fund budget, he said.
The city thought it was starting 2002 with $75,000 in the bank, but a July audit revealed a deficit in 2001, putting the city $239,000 in the hole as of Jan. 1. An unanticipated $140,000 increase in health insurance brought the total red ink to $865,000.
The city will also have to carry over about $500,000 in bills from this year. Tax revenues are expected to fall about $110,000 short, he said, raising the projected 2002 year-end deficit to $610,000.
Tax increases
Ryan stopped short of predicting another tax increase for 2003. Municipal department heads are working on their budget requests now, he said.
Sharon did raise taxes 15 mills over the past two decades, but it went 11 years with only a 2.7-mill increase that was quickly outpaced by inflation, the mayor said.