Thirty-one Ohio cities — including Springfield — show signs of elevated financial stress, an indication the city could be on the highway to deep trouble, especially in the event of a recession, a state auditor’s report says.
Springfield has a critically low reserve of money to cover unexpected costs, according to the report released Wednesday by Ohio Auditor Dave Yost, a Republican who just announced he is running for attorney general.
“The bottom line is I’m a little bit concerned about the effect of the next recession,” he said. “But a lot of it will depend on the nature of that recession — how widespread the pain is among Ohio’s local governments.”
Springfield and Middletown are the only local cities on the list. Three counties are on Yost’s list, but none of them are in the Miami Valley.
Using 2015 data in 17 key areas — such as fund balances, revenue trends and debt — the state auditor issued a report to cities and counties on how they’re doing. Yost said he doesn’t like putting local governments into “fiscal emergency” status so he wanted to give cities and counties data that might help them head off trouble.
“Think of this as a fiscal physical,” he said.
Clark County received cautionary labels in two areas, while the remaining 15 areas were labeled as positive.
The report shows what city leaders have said for a while, Springfield Finance Director Mark Beckdahl said.
“We’ve seen a decline in our fund balances over the last four years,” Beckdahl said. “I don’t think that’s a secret. Obviously, it’s something we’re working on and one of the reasons we’ve asked citizens for additional funding through a tax increase.”
Springfield residents will vote on a 5½-year income tax increase as part of the May 2 ballot. The income tax rate in Springfield would increase from 2 percent to 2.4 percent through 2022, if voters approved it.
For a worker making $30,000 a year, the tax would cost an additional $10 per month.
But the state report doesn’t justify a tax increase, said local attorney Dan Harkins, chairman of a committee opposed to the issue. The city’s tax revenue was cited as positive on the report, indicating an upward trend.
“It indicates the city needs to change the way it operates and cut its expenses,” Harkins said.
The city’s unassigned general fund money has dropped from about $5.9 million in 2011 to $2.3 million at the end of 2015, according to the report — a 60 percent decrease over a five-year period. The city is operating on less money than it did in 2007, Beckdahl said.
The decline in revenue has been caused by cuts from the state, declines in property tax revenue and a reduction in reimbursements from EMS runs, Beckdahl said.
“All of those things together are the reasons we have a shortfall,” he said.
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Springfield residents defeated a similar income tax increase in November that would’ve generated $6.7 million annually for the city’s general fund — a portion of which was expected to restore the city’s depleted reserve fund.
A divided commission then passed its budget for this year, which included $800,000 in cuts to the municipal court, parks, and police and firefighters overtime.
“We’re working on both sides of the equation,” Beckdahl said. “We’ve made significant cuts already and we’ll continue to make those significant cuts and explore ways to become more efficient in conjunction with asking for more revenue.”
The city projects generating $38.4 million in general fund revenues this year. It also estimates spending about $39 million, leaving about a $600,000 deficit.
At the end of 2016, the city’s reserve fund was about $2.2 million, Beckdahl said.
During the fall election, city leaders said up to 10 civilian workers at the police division could be laid off and replaced by removing officers from the streets if the levy failed. It also said it could lay off up to 25 non-union employees, many of whom work at City Hall.
If approved in May, the additional tax money would be used to improve Springfield’s streets, update the city’s aging police and fire fleets, and restore overtime for police and firefighters. It would also create a special police task force to combat the heroin epidemic and re-open the shuttered Fire Station No. 5 and the police substation on Johnny Lytle Avenue, both of which closed on Jan. 1 due to the budget cuts.
Citizens for a Stronger Springfield Chairman Andy Bell, which supports the tax increase, couldn’t be reached for comment Wednesday.
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The report includes some positives for Springfield, including a low amount of debt and compliance with budgetary records.
Overall, 82 percent of counties and 92 percent of cities have at least one cautionary or critical indicator.
Overall, local governments have navigated choppy waters pretty well, Yost said.
Kent Scarrett, executive director of the Ohio Municipal League, said the report and data “puts a finer point on what we’ve been talking about. That there are great challenges out there in different communities and it’s incumbent on us as local leaders and state leaders to try to address these.”