Y’town’s financial picture improving, but still bleak

Here’s the bottom line from the latest analysis of the city of Youngstown’s finances: In five years, the operating budget will drown in almost $6 million in red ink unless there are drastic cuts in spending or significant increases in revenue.

And since the sources of income for city government are stagnant, at best, Mayor Jamael Tito Brown and city council have no choice but to take an ax to the budget.

Brown and lawmakers may be inclined to downplay the urgency of the situation given that the budget analysis first reported by The Vindicator on Tuesday reflects a major reduction in the projected deficit.

Last year, Michael Abouserhal, an expert in public finances, was hired by the city to review the imploding budget and to make recommendations on how government could avoid state-declared fiscal watch or emergency.

The certified public accountant warned that Youngstown could face a $16 million operating budget deficit in 2023 unless drastic action was taken.

Abouserhal, former head of the Ohio Lottery Commission and retired vice president of finance and business services at Cuyahoga Community College, developed an action plan for stream-lining operations, but many of the proposals were not adopted.

Indeed, when the consultant’s contract expired, we criticized the mayor and council for what appeared to be a public relations ploy.

Thus, we wondered why Brown again turned to Abouserhal this year to assist in developing a financial road map for city government.

As we noted in an editorial at the end of January, this will be another exercise in futility unless the keepers of the public purse place the interest of the city above political expediency.

For instance, Abouserhal recommended employee furloughs, elimination of raises, an increase in health insurance premium contributions and laying off workers.

Reluctant mayor

But the mayor has been reluctant to “send anybody home.” This, despite the fact, that more than 70 percent of the city’s general fund is dedicated to employee costs, including wages and benefits.

There’s no doubt that the latest analysis of the city’s revenue and expenditure is a definite improvement from last year’s projections. But, so long as there’s red ink, Youngstown will have to live with the threat of state-declared fiscal watch or emergency.

The deficit projections are as follows: $1.11 million in 2020; $2.38 million in 2021; $3.71 million in 2022; $4.69 million in 2023; and $5.65 million in 2024.

There’s cause for concern because the chances of increasing revenue in any significant way are slim to none.

Indeed, there are storm clouds gathering over the city because of the $4.5 million the Ohio Auditor’s Office says the general fund owes the water, wastewater and sanitation funds. The money from those three independent accounts was used in 2017 for economic development projects. The state auditor has ruled that such expenditures were improper because they weren’t directly related to the operations of the water, wastewater and sanitation departments.

The state has demanded repayment from the general fund. If the ongoing negotiations between the mayor and state officials fail, the city will be on the hook for the $4.5 million.

Last year, the city used another $1 million from the three independent funds for development projects, which also is a point of contention for the state.

While Abouserhal acknowledges that city government is making “tough decisions” to deal with the budgetary shortfalls, he says the city is “still facing financial challenges.”

“There is a need to get going on revenue,” the consultant told The Vindicator.

That’s easier said than done given the reality of Youngstown’s tax base. The city’s population has declined since the 2010 population census, and an increasing number of residents don’t pay income tax because they aren’t in the workforce.

In addition, the closing of Northside Regional Medical Center and the idling of the General Motors Lordstown assembly plant have disrupted the city’s revenue stream.

As Kyle Miasek, the city’s interim finance director, told council as it was about to vote on a balanced budget for the new fiscal year, “We hope to make deeper cuts to have balanced budgets so we don’t have to come here year after year to make cuts. We don’t want to be in hot water again.”

To avoid hot water, Mayor Brown and city lawmakers must accept this reality: Spending cuts – rather than revenue increases – are the only cure for Youngstown’s ailing operating budget.