XENIA — With a cash flow shortage projected to be more than $1 million, city of Xenia officials are asking the state to “show them the money.”
City council last week passed a resolution urging the state to reinstate local government funding (LGF) and other sources of cash flow including the estate tax and personal property tax.
According to the resolution that will be forwarded to state representatives, over the last two years the state cut the LGF by 50 percent, resulting in a reduction in income to Xenia by approximately $500,000 per year. Ohio has also eliminated the estate tax, which costs the city an average of $300,000 per year and the personal property tax reimbursement, which resulted in a reduction of funding by approximately $200,000 per year.
In addition, House Bill 5 will result in an increase in costs and a reduction in tax revenue for Xenia and will reduce funding by “well over $100,000 and probably much more,” the resolution states.
Add up all of those reductions in money the city has counted on for decades and Xenia would not be faced with a cash-flow shortage. In 2013, the city had more than $500,000 in positive cash flow, Finance Director Mark Bazelak said. As of 2015, the city had a deficit of more than $650,000. By the end of 2017, it’s projected to be more than seven figures. By the end of 2020, there will be no money in reserve at all, according to projections.
“Had we had that revenue, we would not be in the financial situation that were in,” Bazelak said. The city was able to stay ahead of the cuts for a few years when the .25 percent income tax was passed to create a capital improvement fund. Money the city normally contributed to capital improvements was then tucked away to help meet the reserve requirement of two months of operating costs and prepare for the state funding cuts.
But now, as the income tax base remains stagnant and economic development not occurring as quickly as originally hoped, the city may be faced with placing a tax levy on the November ballot or reducing its safety forces, meaning there could be fewer policemen and firemen on the roads. In all, a total of 12 police and fire positions would need to be cut to help the city reduce at least $1 million in expenses.
Public safety takes up the biggest chunk of the key operating funds, Bazelak said, adding that if the city removed income tax, court and city administration expenses it would save about $1 million. But that’s not feasible.
“You’re not going to have a city, basically,” he said. “Overwhelmingly it is police and fire. that’s why when we look at the expenditure side, in order to make the adjustments we need to make, obviously … it has to come out of the biggest piece of the pie.”
Bazelak said the city is still down roughly 8.5 positions and will most likely not fill any vacancies that occur through attrition this year.
The potential safety services tax levy would cost the owner of a $100,000 home approximately $8.75 a month, according to city documents.
Bazelak also stressed that the city facilities project is not affecting the cash-flow problem. The debt service is being paid through the capital improvement fund and through enterprise funds such as sewer and water. Bazelak said once the new city administration building is completed, there will be some extra costs incurred for operating that building.
“(But) it’s in no way a significant amount,” he said.
While cities like Xenia are scrambling to balance their budgets, the State of Ohio has more than $2 billion in reserves, according to the resolution. The state, City Manager Brent Merriman told council at a January special session, balanced its budget, padded its rainy day fund and provided a cut in income tax at the state level — all on the backs of local governments.
Representatives from Trotwood, Beavercreek, Riverside, Bellbrook and Fairborn all spoke of their woes at the January mayor and managers meeting.
“There’s no meeting that you attend without this coming up,” said Mayor Marsha Bayless. “It affects Xenia but some places are affected even more so than we are.”
Contact Scott Halasz at 937-502-4507.