Youngstown faces uncertainty as a result of revenue shortfalls

Almost a year to this date, we advised the new mayor of Youngstown, John A. McNally, to be conservative when establishing revenue projections for 2014 because the city was skating on thin financial ice.

We also suggested that the administration establish spending priorities to address the most pressing problems in a city that has a declining population, stagnant tax base, an intractable crime problem and deteriorating neighborhoods.

We take no pride in saying that our pessimistic view of the city’s finances was justified — as the front-page story in Wednesday’s Vindicator revealed.

City government ended 2014 with $523,300 less in income-tax and business profit-tax collections than had been budgeted.

But that isn’t the worst of it. According to Finance Department officials, tax collections this year are expected to be worse than what they were in 2014.

In other words, McNally and city council will have to keep a tight rein on spending. That may be easier said than done.

Indeed, that’s the advice we gave the mayor last year, but reality has a way of rearing its ugly head in a city such as Youngstown. The erosion of the tax base is a reflection of the growing number of residents on fixed incomes — pensions, Social Security or welfare — compared with those who are working. In addition, companies in the city have had a difficult time weathering the economic storm caused by the national recession.

Finance Director David Bozanich shed some light on how city government develops its financial projections.

“I call companies and have conversations with them to see how well they’re doing, and project off of that information. Companies were more optimistic” than they should have been last year.

That statement needs to be etched in stone in City Hall, because given what has occurred over the past several years, there is little reason for optimism.

The city’s financial situation would have been even more dire had it not received a $2.86 million payment from Vallourec Star, which has a $1.1 billion state-of-the-art steel pipe-making facility along Route 422.

Vallourec will pay that amount for the last time this year. Then for 96 years beginning in 2016, Youngstown will receive only $100,000 annually from the company.

Future prospects

It doesn’t take a certified public accountant to know that it would be the height of irresponsibility for the mayor and council to make any long-term financial commitments based on this year’s revenue.

It is reassuring that administration officials are taking a realistic view of things.

“We believe that 2015 will be a difficult year, and 2016 will potentially be more difficult,” Bozanich said last week. “Our objective is to live within our means.”

With storm clouds on the horizon — the closing of the Youngstown mail processing and distribution center, the relocation of the Cafaro Co. headquarters and the loss of jobs at the private prison, for starters — the mayor and his economic team have no alternative but to reassess the major expenditure in the operating budget.

Between 70 and 80 percent of the general fund, which is fed by tax revenue, is eaten up by wages and benefits. In other words, employee costs are city government’s bane of financial existence.

With that in mind, we believe it’s time for the mayor to conduct a top-to-bottom review of the city payroll with the goal of eliminating jobs that aren’t absolutely necessary to provide for the health, safety and welfare of Youngstown’s residents.

The private sector has been shedding jobs for the past several years. It’s government’s turn.