Youngstown’s tax revenue moving in wrong direction

If there is a silver lining in the dark cloud hanging over the city of Youngstown’s finances, it is that government officials are quite good at predicting the future.

City residents may not like what they’re hearing from City Hall, but at least it’s the unvarnished truth.

“It’s a tough economic environment,” said David Bozanich, the veteran Youngstown finance director. “We’ll be lowering the projections for 2015 and 2016. Next year is going to be very challenging.”

The “projections” Bozanich is talking about have to do with tax collections, which have been on the decline for several years.

Indeed, when Mayor John A. McNally took office in January 2014, city government was skating on thin financial ice, and we advised him to be conservative in establishing revenue projections for his first year in office. And we laid out the reasons why Youngstown was struggling: a declining population; stagnant tax base; intractable crime problem; and deteriorating neighborhoods.

As 2014 came to an end, city government had $523,300 less in income-tax and business-tax collections than had been anticipated.

Against that backdrop, the city budgeted $41 million for this year, a 4.4 percent decrease from 2014. But as the year draws to a close, the finance director is signaling that even the projected decrease was overly optimistic.

Bozanich, who discussed the budget during a recent meeting of council’s finance committee, revealed that city government won’t hit the $41 million target this year. The actual amount the city will take in by year’s end will be known in about a month.

But, the facts about Youngstown’s finances won’t change.

Councilwoman Janet Tarpley, D-6th, who chairs the finance committee, wasted no time in getting to the heart of the matter. Tarpley said the administration should immediately institute a hiring freeze and suggested that layoffs would be in the offing.

No financial miracles

While Bozanich steered clear of discussing layoffs, he, along with Mayor McNally, undoubtedly know that no financial miracles are on Youngstown’s horizon.

In fact, this year could be the calm before the storm. Why? Consider Bozanich’s analysis of city government’s finances.

“There are several relatively large businesses in the city that are closing, downsizing or not meeting financial expectations. There are certain things we thought would happen that have not happened.”

It is encouraging that the bean counters in City Hall aren’t going to make the same mistake again, which is why the revenue projections for the next couple of years are anything but rosy.

By any accounting, the downturn of the oil and gas industry has been a major blow to the city of Youngstown, not because of exploration, but because of the impact on Vallourec Star. The company’s $1 billion-plus technologically advanced manufacturing complex was designed to produce steel pipe for oil and gas exploration.

In August, the company announced that between 60 and 80 jobs would be cut, then this month the company said there would be another round of job cuts. City officials believe 100 workers could lose their jobs.

Add to that the 185 jobs slashed at the private prison in Youngstown owned by Corrections Corporation of America, the relocation of 150 jobs when the U.S. Postal Service closes its downtown Youngstown mail processing center, and the loss in the city of 200 positions with the Cafaro Co. moving its headquarters to Niles.

While Mayor McNally does not believe that layoffs will be necessary, we would urge him and Bozanich to do what the private sector has done since the Great Recession began in late 2008: Downsize.

With the population of the city on the decline and with companies cutting back, the demand for services also will be reduced.

Thus the question: How many employees does the city need to serve a shrinking community?

There is no untapped source of revenue in Youngstown, which means that income-tax and business profit-tax collections offer a glimpse into the future.

Tough decisions will have to be made.