Official: City faces lean budget

Finance chief predicts slower growth ahead in Toledo, nation

10/29/2012
BY IGNAZIO MESSINA
BLADE STAFF WRITER
City Finance Director Patrick McLean.
City Finance Director Patrick McLean.

The nation could face an anemic economy in 2013 and the city of Toledo should brace for an austere municipal budget with slower growth, the city’s top financial official warned.

City Finance Director Patrick McLean made the predictions less than three weeks before the Bell administration’s Nov. 15 deadline to release next year’s budget.

“The U.S. economy could be characterized right now as very slow growth and very high levels of uncertainty. Growth forecasts for the remainder of 2012 and into 2013 continue to be anemic at best and some worse case scenarios suggest growth could stall or even reverse,” Mr. McLean told Toledo City Council’s finance committee.

He gave no early predictions for 2013 revenue or expenses — including the amount of income taxes expected to be collected, which is the largest source of revenue for the city.

Income taxes for the city were up to nearly $106.5 million collected through the end of September, which is 5 percent greater than the same time last year.

“What we are showing you today is a pattern of continued solid growth in our income tax figures, that is certainly something we see as a positive for the economy but we can't divorce Toledo from the broader economy,” Mr. McLean said. “Our 2013 prediction when they come out ... will not likely to predict growth at this 5 percent level.”

He guessed the budget could assume more modest growth of 2.5 to 4 percent for income taxes.

While income tax collections are up over last year, city officials have said for months they expect the local government share from the state to be down.

The Bell administration said it will end 2012 with a $900,000 general fund surplus, but Councilman George Sarantou, chairman of council’s finance committee, said it was misleading to make that claim.

“Based on the information they are giving us, I think unfortunately we are going to have to dip into the capital improvements budget again in 2013,” Mr. Sarantou said. “They are saying they expect a $900,000 surplus but they shouldn’t call it a surplus because we will need $11 million from CIP to balance the 2012 budget.”

The city for years has raided the CIP budget, which is dedicated money for things such as street repairs, and instead used it to fund day-to-day operations such as police and fire salaries.

Past budgets in the Bell administration general fund budgets have been austere.

The city squeaked out of 2011 with $326,000, which was enough extra cash to fund about a single day of expenses, but the city had used millions in CIP dollars that year for the general fund.

The 2012 budget, approved on Jan. 31, was a $601 million dollar blueprint that included money to hire more police officers, salvage public recreation programs, and put a little aside for a rainy day. More than a third of the budget is for the general fund.

Right now, the city predicted it will collect $241.5 million in total revenues, which is higher than the $238.9 million originally predicted. Among that is $2.4 million expected from red light cameras while the city had predicted $1.29 million. On the other hand, the city said it would sell $530,000 of fixed assets but now is predicting $30,000 in sales.

Council President Joe McNamara said the city has a "structural deficit" and while finances are stable, it needs to stop using capital improvement money for daily operations.

"This year, $11.1 million was budgeted to be borrowed from the CIP and to balance that hit from the CIP fund, the city borrowed $4.6 million more this year than we did last year so we still have a structural deficit in that that we are borrowing from ourselves to pay for operations," Mr. McNamara said.

Contact Ignazio Messina at:

imessina@theblade.com

or 419-724-6171.