Niles dodges fiscal bullet with opinion from state

For about a week in August, it appeared that the effort by the city of Niles to get out of state-declared fiscal emergency had hit a major roadblock because of the ballot language used for a permanent 0.25 percent income-tax increase residents are being asked to approve in November.

The language defined how the $900,000 to be generated by the tax annually would be spent. Mayor Ralph Infante, who will be leaving office at year’s end as a result of losing the Democratic nomination to former Councilman-at-large Thomas Scarnecchia, made it known Aug. 19 that the money would be divided among the general fund, police and fire equipment and street resurfacing.

That information hit the state fiscal oversight commission like a ton of bricks, because members had expected the entire $900,000 a year to be dedicated to the general fund to eliminate the deficit.

Deficit elimination is a key provision of a five-year fiscal recovery plan the city was required to submit to the state in order to have the yolk of fiscal emergency lifted.

“They looked surprised,” city council President Robert Marino said of the commission members. “There was a disconnect between the financial representatives and the administration.”

Fortunately, the surprise didn’t last long.

About a week later, state auditors declared that all the revenue from the 0.25 percent income-tax increase could be used to reduce the general-fund deficit.

“The auditors told us that [they found] no specificity in the language, so all the money can go to the general fund.” Marino said. “We don’t need to change the five-year forecast.”

That’s certainly good news for the city of Niles, and it’s even better news for the next mayor.

Scarnecchia, the Democratic Party nominee, is being challenged in the Nov. 3 general election by two write-in candidates, Edward D. Stredney and Barry Profato.

Laying blame

During the primary election campaign, Scarnecchia made much of the fact that the city’s finances collapsed under Infante’s watch, and he blasted the mayor for trying to deflect blame by pointing the finger at the auditor and treasurer.

If elected, Scarnecchia said he would “totally tear through every department, every piece of the budget ... .”

It appears that the former council member was prescient in his analysis of the city’s fiscal condition.

According to Auditor Charles Nader, who tendered his resignation Thursday and is not seeking re-election, government will have to make numerous cuts, including possible layoffs, by December. Nader added that if voters say no to the tax increase, the situation would be even more dire.

“There will have to be cuts all across the board next year, and they’re not just going to be layoffs,” Nader said. “You will have to cut the budget anywhere from 10 to 15 percent.”

But the city auditor may be painting too rosy a picture – if that’s possible in the city of Niles.

According to state auditors, government expenditures exceed revenues by $1.6 million, which can mean only one thing: furloughs coming sooner rather than later.

As we’ve repeated ad nauseam, when more than 60 percent of government’s operating budget goes for salaries and benefits, the payroll must be the first casualty when there’s an implosion.

Indeed, things are so bad in Niles that a well-known company sent a letter to the city demanding payment of its tax refund of more than $23,000.

Michael Janak, chief financial officer of Dinesol Plastics Inc., was upset that the city did not contact taxpayers to say that their refunds would be delayed, given the government’s poor financial condition.

Janak complained that his company first learned about the delay in payments from the news media.

“This is not acceptable,” the chief financial officer wrote. “Dinesol would have preferred to learn of the city’s intentions to delay payment directly ... rather than a news article.”

The handwriting is on the wall: If voters reject the 0.25 percent income tax increase, the five-year recovery plan will be shattered and fiscal emergency will remain in place.