Fiscal emergency in Niles will demand some tough decisions

There’s now a silver lining in the dark economic cloud that has hung over Niles city government since the end of 2013 when the operating budget showed a deficit of almost $500,000. To be sure, this week’s declaration of fiscal emergency by Ohio Auditor David Yost isn’t something Mayor Ralph Infante and members of city council should be proud of — given the stigma attached to a community’s economic collapse.

But Niles isn’t alone in bearing the scars of the national recession that began in late 2008 when then President George W. Bush was leaving office.

Governments at all levels took a beating, and many are still struggling to get on the recovery train. In the Mahoning Valley, the Youngstown City School District is the most glaring example of a public entity that was forced to face the reality of a budget that was gushing red ink.

Niles isn’t in as bad a shape as Youngstown schools were beginning in 2006 when the state declared fiscal emergency, which triggered the creation of a fiscal oversight commission.

The commission took control of the school system’s finances, forcing the board of education to do its bidding. It was bitter medicine but it worked.

Likewise, the city of Girard had to contend with a fiscal emergency designation, which forced Mayor James Melfi and city council to hand over control of government’s purse strings to an oversight commission. It was a humbling experience, to say the least, but the recovery and the five-year forecast for a balanced budget were worth the pain and suffering.

In Niles, the picture isn’t as bleak as it was in 1980 when the city had the distinction of being the very first to feel the effects of the 1978 law that gave the state the authority to take control of the finances of fiscally challenged local governments and school districts.

A lot has changed over the past 34 years in government financing, but when it comes to the state’s involvement, the same rules apply.

“The city of Niles faces a dire financial challenge,” said Ohio Auditor Yost in announcing the declaration of fiscal emergency. “This office stands prepared to help the city conquer it.”

The auditor had no choice but to step in after his staff determined that there was an overall deficit of $61,093 as of the end of July.

Mayor Infante, who has been around politics for a long time, made it clear that his administration has been addressing the fiscal crisis by cutting expenses.

“We’ve taken all the steps to reduce costs in all departments,” he said. “We took steps by leaving 22 jobs unfilled.”

But it will be back to square one when the state-ordered fiscal oversight commission begins its work. Because more than 80 percent of government’s operating budget is eaten by employee costs, including wages and benefits, that’s where the cuts will have to be made.

Tax increase?

Given the extent of the problem, the mayor and council should brace themselves for a possible demand by the commission for an income tax increase — if the goal of balancing the budget cannot be met. That’s what has happened in other communities.

In other words, everything is on the table — as far as the commission would be concerned.

We believe Niles could learn a great deal by meeting with officials of Girard and the Youngstown school district. They will find out what they need to do to weather the storm that’s bound to come after the commission goes through the budget with a magnifying glass.

Nursing the city of Niles back to health will be difficult and will require the executive and legislative branches to open the lines of communications with the employees and their union representatives, and with residents.

But, the presence of the fiscal oversight commission also provides the mayor and council with crucial political cover.

They can legitimately say they have no statutory power to block the commission from requiring deep cuts in the payroll.