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Sandusky ready to tackle deficit issue

Andy Ouriel • Dec 9, 2013 at 11:10 AM

They can:

a. Raise revenues, such as increasing taxes.

b. Cut staffing via layoffs.

c. Spend down the savings, or carryover, account.

Unfortunately, there isn’t a “none of the above” choice, so they must pick at least one option going forward.

The fiscal pinch stems from a budget projection showing almost a $1 million deficit in the $16 million everyday operating budget. The budget funds operations such as fire, police and greenhouse services.

A $1 million shortfall derives from a $500,000 federal grant employing six full-time firefighter positions ending this month. Another $500,000 is gone from a reduction in local government funds and estate taxes.

To maintain current operations, officials must find $1 million elsewhere before approving the budget in March.

It’s unlikely officials have the authority to raise taxes or find new income streams in just a few short months.

Meaningful talks about layoffs have not yet occurred in the public setting.

Any layoffs would further deplete an already-small work staff. City staffing levels have decreased 25 percent in the past decade, from 280 in 2004 to roughly 209 today.

But what about spending down the city’s carryover, totaling $4 million?

Despite the cushion, a high-ranking financial official advises against withdrawing funds from this savings account.

“Reserves are the cornerstone of financial flexibility,” Sandusky finance director Hank Solowiej said. “Reserves provide options for responding to unexpected or unplanned events or emergencies”

If commissioners did spend some of the reserves, they’d only provide a short-term fix with future problems looming.

“If we had to use reserves for only a year or two, it might be OK” Solowiej said. “If, over the long-term, we spend more than we bring in, eventually you will run out of funds. I know this would impact our bond rating and the cost of borrowing if reserves are depleted without a plan to restore them”

But consuming some carryover for day-to-day operations might be appropriate, city commissioner-elect Dennis Murray Jr. said.

“I’m in favor of a slight erosion of the reserves at this point in time,” Murray said. The carryover “has gotten a little ahead of itself of where it needs to be in relation to the general fund”

The two other newly elected commissioners, Dick Brady and Naomi Twine, said they oppose spending reserves. All three begin their new four-year terms in January.

Sandusky’s surplus

Sandusky’s reserves, also known as carryover, fluctuate based on what the everyday operation budget’s bottom line is each year.

If the year-end budget shows a $100,000 surplus, then that’s $100,000 added to the reserves. If the year-end budget shows a deficit of $200,000, that much is decreased.

The current surplus, somewhere between $3.7 million to $3.9 million, represents about 25 percent of what the city spends each year on operations, such as police, fire and greenhouse services.

Carryovers are good to boost a government’s bond rating when, for instance, officials need to borrow money for construction projects.

Year      Amount

2013     $3.7 million to $3.9 million

2012     $3.71 million

2011     $3.62 million

2010     $3.48 million

2009     $2.85 million

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