Bleak economic forecast forces tough decisions in Youngstown

There are only two ways govern- ment can make ends meet: raise revenue or cut expenses. And there’s only one main source of revenue for government: taxes.

People and businesses pay taxes, and when there aren’t enough of each group, the red ink flows — forcing the keepers of the purse to tighten the strings.

Given that employees’ salaries and benefits gobble up most of the public sector’s operating budget, it doesn’t take a genius to know what must be done to erase the deficit.

The city of Youngstown is in just such a situation with its budget, but fortunately, veteran Finance Director David Bozanich has a clear view of how to deal with a projected $2 million shortfall this year.

“If we don’t see employee reductions through attrition or significant increases in revenue [this year], 2016 will be a tough year, and 2017 will be a more difficult year,” Bozanich said.

Mayor James A. McNally should not hesitate to do whatever is necessary to deal with city government’s crisis. Indeed, the only realistic option is for McNally to begin the process of slashing the payroll.

Why? Because there is nothing to suggest that tax revenues that have been declining over the past several years will suddenly show an upturn.

The city closed out 2014 with $523,300 less in income-tax and business-profit collections than it had expected, and Bozanich and other finance department officials are anticipating $2 million less this year than last year.

In other words, 2015 will be a challenge for the McNally administration — but that isn’t the worst of the news. Next year and the year after that will continue to see city government imploding fiscally.

Here’s the bitter truth about Youngstown: The tax base is shrinking, the population is declining, most of the residents are on fixed income and, therefore, don’t pay income tax, and there’s bad economic news on the horizon.

So, what’s to be done?

First, a cost-cutting plan must be developed that has at its core a decrease in the number of employees. Although Bozanich says there won’t be layoffs this year, there are signs of a weakening economy in the city that will affect the bottom line.

While the closing of the U.S. Postal Service’s mail-processing and distribution center in Youngstown, the relocation of the Cafaro Co. headquarters and the loss of a federal contract at the Northeast Ohio Correctional Center in Youngstown have been well publicized, recent reports out of Vallourec Star are cause for major concern.

Oil, gas exploration

The state-of-the-art, $1.1 billion steel-pipe making complex on Route 422 was designed to meet the needs of the expanding oil and gas exploration in the shale play. Things were going according to plan, with the cities of Youngstown and Girard benefitting from the taxes paid by the employees, until the global price of oil began to fall.

Today, Vallourec Star is in the midst of a shutdown and the future depends on whether the price of petroleum, in particular, remains low. Domestic oil and gas producers have cut back on their drilling operations.

But that isn’t the only low point from Youngs-town’s standpoint. This year marks the end of the $2.9 million annual payment from Vallourec for the land the company leases. Next year, the city will receive $100,000.

There’s nothing to be gained in whitewashing what Youngstown is experiencing financially. Difficult decisions will have to be made — and that means cutting expenses.

It also means Mayor McNally and city council must take a serious look at Youngstown 2010, the planning blueprint, and begin to shrink the geographic size of the city. A population of less than 65,000 necessitates a reassessment of the level of services government can provide.