The city’s 2009 budget needs to drop $3 million from 2008, the mayor says.

By Ed Runyan | November 11, 2008 at 12:05a.m.

Warren Mayor Michael J. O'Brien

WARREN — In 2005, when Delphi Corp. filed for bankruptcy, there was a great deal of speculation about the effect it would have on the local economy and on local governments.

Three years later, the effect on Warren has become more obvious, as city officials wrestle to create a 2009 budget they expect to be about $3 million below the city’s 2008 spending plan.

Mayor Michael O’Brien says the reduction in Delphi Packard payroll from 3,800 employees in 2005 to 750 is costing the city millions.

Delphi was Warren’s largest source of income tax revenue in 2005 “by a long shot,” providing about $1.3 million, O’Brien said. In 2008, that figure is down to about $135,000.

“Flat” income tax receipts in 2008 were caused by the loss of 130 jobs at Golden Aluminum Extrusions on University Street Northeast when it closed last summer and the strike at Thomas Steel Strip Corp. that idled about 260 union workers, O’Brien said.

The situation is likely to get worse, O’Brien said. About 100 workers at Concord Steel on Buena Vista were locked out of their jobs a couple of weeks ago, and General Motors will lay off 1,100 workers in January.

The city expects 2008 total receipts to equal about $18.4 million at the end of 2008 — about $300,000 less than 2007 receipts, said Tom Gaffney, Warren income tax administrator.

“The city’s bread and butter is income tax, and when it fluctuates to the level it is, it cripples our general fund,” O’Brien said.

The city started adjusting its spending in July, when Auditor David Griffing projected the city would have a deficit of more than $1 million by the end of the year if it didn’t make cuts.

By eliminating most overtime and using other measures, the city now expects to end 2008 in the black, O’Brien said.

With 2009 income tax revenue projected to remain flat or drop again, and with other forms of revenue such as inheritance taxes and building permits dropping, the city must find a way to cut about $3 million, O’Brien said.

Normally, a budget is predicated on increasing revenue to cover increasing costs, O’Brien said. This one will be built on lower costs, he said.

Layoffs are one of the ways costs will be reduced, O’Brien said this week. He refused to give specific layoff numbers yet or say how much of the cutting will be done through layoffs. He predicted that specific layoff numbers will be revealed in about two weeks.

The mayor said he has already decided that janitorial contracts will be eliminated throughout the city, with workers in each department handling the cleaning of their own building. He’s also examining every service contract the city has with third parties to find ways to reduce costs.

Marc Titus, president of the union that represents Warren’s firefighters, the International Association of Firefighters Local 204, said he agrees with those who have suggested at recent council meetings that the city should consider whether it needs to have its own dog catcher, housing inspection and parks department, since such departments are available at the county level.

City officials “need to define what are the basic services and what level of services are they going to provide,” Titus said.

O’Brien disagreed that reducing the city’s budget by $3 million will involve the elimination of the dog catcher, housing inspection department or parks department.

runyan@vindy.com