Trickle effect likely for local economy

Delphi employees' income tax supplies 8 percent of the city's general fund.
By PETER H. MILLIKEN
VINDICATOR TRUMBULL STAFF
WARREN -- The impact of Delphi Corp.'s bankruptcy filing and reorganization could go far beyond the $1.4 million local Delphi Packard Electric Systems employees pay in city income tax.
The impact on local residents would include municipal and social services and the real estate market, agreed Warren's mayor and treasurer, a United Way official and a real estate agent.
"There's a multiplying effect with these types of economic problems," Mayor Michael O'Brien said, referring to the ripple effect not only on the city, but also on the entire local economy. "That really resonates into a large economic problem in the community."
Through their city income tax payments, Delphi Packard employees supply 8 percent of the city's general fund, the mayor said.
"If the wages are cut, then the [city's] income would be cut and services would have to be cut or reduced," the mayor said. "We run a pretty tight budget as it is because of the economic downturn over the last few years."
The city also derives revenue from supplying water and sewer service to some of Delphi Packard's complexes, the mayor said, adding that he didn't know the dollar amounts. "From the city's perspective right now, it's a wait and see attitude," the mayor said.
Bad news for region
If these employees experience pay cuts or layoffs, the effect on the city and its finances will be "substantial," according to John B. Taylor, city treasurer. "Nobody knows how severe the impact's going to be until this thing shakes out in the bankruptcy court, but this is not good news for our community at all."
If the bankruptcy results in cutbacks locally, there will be a "trickle-down effect" on Delphi's suppliers and vendors, locally and nationally, Taylor said.
"The most troubling thing is that two of our largest employers around here are in bankruptcy, WCI and now Delphi, and this is certainly a very serious matter for the communities in this area," he observed.
O'Brien said he'll send a letter expressing his concerns about Delphi Packard employees and retirees to the federal bankruptcy judge assigned to Delphi's case. "A large concentration of retirees live in the city," O'Brien noted.
The employees and retirees and their families will postpone major purchases, such as car and home buying, until the bankruptcy's impact on them is known, the mayor said.
"Right now, everything basically for Delphi employees and retirees is on hold, and may be on hold for some period of time because bankruptcy reorganization takes an awful lot of time," the mayor said. "Quite frankly, things may become stagnant as far as purchases for some time until things shake out."
"If those purchases are postponed or if they receive less money, that's less money they're going to spend in restaurants and shopping,'' he added.
The region has already suffered from reductions in Delphi's local workforce, the mayor observed. In the company's heyday, 13,000 to 14,000 people worked in local Delphi Packard Electric plants. Now, the company employs 5,000 people in the Mahoning Valley, he said.
"Delphi has moved a considerable amount of their operations outside the city over the past four years," he added. But at the same time the company has made huge investments locally in state-of-the-art equipment.
Delphi Packard, General Motors, Forum Health Trumbull Memorial Hospital and WCI Steel are the city's largest sources of income tax revenue, the mayor said.
United Way to be affected?
In the fall 2004 campaign, Delphi Packard employees gave $475,000 to the United Way of Trumbull County, and Delphi's corporate gift was $40,000 for a combined total of $515,000. That combined gift totaled almost 25 percent of the $2,051,000 that was raised.
"Delphi Packard Electric and its employees, both salaried and hourly, have been vital to our local economy in addition to their contributions and leadership in the United Way system and the entire human service sector," said Thomas Krysiek, president of the local United Way.
"Any reduction is going to have a significant impact on our ability to meet the human service needs of our community," he added. "It's a cruel predicament that when fund-raising is most difficult, the needs of the community are the greatest.
"To some extent, many in our community have relied on our largest employers to carry the burden, and certainly, it's now time for everyone to pull on the rope at the same time and in the same direction if the essential human needs of our community are going to be met," Krysiek said.
Kathy Smith, manager of the Howard Hanna Real Estate Services office in Howland, said despite fears of a worst-case scenario driving down the local economy, it should be remembered this is a bankruptcy, not a closure.
Though she said the bankruptcy will have an effect, "it remains to be seen" what kind.
She noted that the Mahoning Valley has some of the most reasonably priced real estate around, that interest rates are still low and that the area's real estate market is "steady" -- rising annually by about 5 percent to 7 percent -- compared with other parts of the country.
milliken@vindy.com