LORAIN — While off fiscal watch, a close eye needs to be kept on Lorain’s finances, state Auditor Dave Yost told City Council members at their Monday meeting.
“Everything is not unicorns and rainbows out there. There is no pile of money,” Yost said. “It would be easy to go back down the road you just finished and end up in difficulty again.”
Yost said Lorain’s three-year financial forecast shows a nearly $1.7 million surplus at year’s end, a $954,000 surplus in 2014; and a $434,000 surplus in 2015. He said the decreasing surplus must be closely monitored and Council must act quickly and decisively to prevent deficits.
“Every subsequent month that goes by, every subsequent quarter without action, makes the final remedy much more difficult,” Yost said.
Lorain has been on fiscal watch since 2002 when it faced a $2.4 million deficit. The designation was created in Ohio in 1996 to warn communities and school districts in danger of entering fiscal emergency. Entities in fiscal emergency are taken over by the state Financial Planning and Supervision Commission, an unelected body which controls spending.
Since 2002, the number of city workers has been reduced from about 600 to 445, many through attrition, but some through layoffs. Yost acknowledged the difficulty of the cuts.
“Every city employee that is reduced represents services that are provided to the people,” he said. “It represents a family and a paycheck.”
To get off fiscal watch, Lorain city Auditor Ron Mantini previously 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.
Removal could improve Lorain’s bond rating, saving taxpayers money when the city borrows by selling municipal bonds to fund infrastructure improvements like bridges and roads. Lorain plans to sell between $5 million and $8 million in bonds in early 2014 and the same amount in 2015 for road projects,
A better bond rating could reduce interest on a bond by about 0.5 percent. For a 20-year, $5 million bond, taxpayers might save as much as $200,000 over 20 years.