Lorain has been removed by the state from the fiscal watch where it had been since 2002, city officials said Thursday.
“It’s great news for the city,” Auditor Ron Mantini said.
The fiscal watch designation was created in Ohio in 1996 to warn communities and school districts in danger of going into fiscal emergency status. Entities in fiscal emergency are taken over by the state Financial Planning and Supervision Commission, an unelected body which controls spending.
Removal could save taxpayers money when the city borrows for capital projects such as building projects and road improvements if Lorain’s municipal bond rating is upgraded. A better bond rating could reduce interest on a bond by about 0.5 percent,Mantini said. For a 20-year, $5 million bond, Mantini said taxpayers might save as much as $200,000 over 20 years.
Lorain plans to sell between $5 million and $8 million in municipal bonds in early 2014 and the same amount in 2015 for road projects, Mantini said. Moody’s Investor Services, the credit rating company that rates Lorain’s bonds, will be informed of the removal before the sale in January or February.
“Hopefully at that point, they’ll assign a higher rating to our bond and we’ll be able to save some money,” Mantini said.
Deindustrialzation and depopulation stripped Lorain of its tax base leading to fiscal watch. Lorain reacted by eliminating city employees, primarily through attrition. There are about 450 today compared with about 600 in 2002.
However, Lorain still had red ink. To get off fiscal watch, Mantini said Lorain had to eliminate the $2.9 million deficit it had at the end of 2009 and project surpluses for three years. Mantini credited deficit elimination to passage in 2010 of a “hospitalization bond” that paid worker medical costs rather than spending from the general fund. Deferred worker paydays eliminated the remainder of the deficit.
Voters passage in November of Issue 13 — a permanent 0.5 percent income tax hike raising $5.3 million annually and
costing a worker earning $50,000 annually an additional $250 yearly — eliminated an approximately $2 million projected deficit. Lorain also established a rainy day fund projected to accumulate $1 million by Dec. 31.
Despite the removal, Lorain still faces fiscal challenges. Mayor Chase Ritenauer said Lorain lost about $2 million annually in the state biennial budget and the new budget doesn’t restore money.
However, Ritenauer, who said he got the good news in a Tuesday meeting with State Auditor Dave Yost, said removal was encouraging. Ritenauer, who took office in 2012, called removal one of the “highlights” of his term.
Ritenauer thanked taxpayers and City Council members. He said removal will be a selling point to attracting businesses to Lorain and expanding existing ones.
“The ship is getting turned around and is going in the right direction,” he said. “Stability is really important from
a financial perspective.”