Council crafts 2001 budget with caution

1/5/2001

Lawmakers are proceeding with caution as they finalize the city's 2001 budget because of an expected recession and findings in a University of Toledo study that predict growth in city tax revenue will slow dramatically this year.

They also heard economic forecasts from UT experts, who predict tax revenue will grow only 1.3 percent this year, the slowest level in three years.

The administration asked council to approve a budget for 2001 which is 3.2 percent greater than last year's. The budget increase is to accommodate pay raises for city employees, said Janet Spencer, manager of the budget office.

Wages and benefits for city employees comprise 75 percent of the general fund budget, she said. The city has 3,140 employees, 2,087 of whom are paid from the general fund.

At council's request, Paul Kozlowski, a UT economics professor, and Patrick McGuire, director of the university's Urban Affairs Center, compiled a tax revenue forecast for the city to serve as a tool in the budget process. “We're looking for very weak growth in tax revenues,” Mr. Kozlowski said.

The report predicts a 0.06 percent decrease in tax withholdings for 2001, coupled with an 11.11 percent increase in individual and business tax revenue, to arrive at the 1.3 percent total tax revenue increase.

Mr. Kozlowski said several factors were used to make the revenue predictions:

A 32 percent increase in first-time applicants for unemployment insurance in 2000 from 1999.

While claims are below recession levels, they are an unfavorable sign for the local economy, particularly tax-revenue growth, he said.

In the Toledo metropolitan area, first-time unemployment applicants in October, November, and the first three weeks of December totaled 9,039, compared to 3,234 for the same time in 1999, he said.

In Lucas County, the numbers for the same period were 7,601 last year compared to 2,356 in 1999.

A slowdown in the number of housing starts in the city from 1,892 in 1998, to 1,729 in 1999, to 1,612 for the first 10 months of 2000. A significant fall is not expected in 2001, but neither is a rapid advance, Mr. Kozlowski said.

Slowdowns in auto manufacturing and auto sales.

Council President Peter Ujvagi said council needs to develop a contingency plan for the revenue side of the budget, and look for creative ways to work with the money available.

“I do not see a decrease in city services. We need to budget smarter,” he said.

Over the next two months, council will review the budget to set priorities, but planning for more than a year may be difficult, Mr. Ujvagi said.

Finance Director John Bibish said local and national economic indicators are telling him to use caution with the budget process and to watch for when the city may need to change course to correct shortfalls.

Councilman Louis Escobar said he does not think officials should panic over the forecast. Officials still need to work to develop the local economy and encourage growth, he said.

Council is expected to review in detail the administration's proposed $36.5 million capital improvements budget this month.