FYI: Sandusky going broke; officials discuss options

UPDATE: The city commission will discuss possible layoffs and other ways to cut back at 5 p.m. today at City Hall.
May 24, 2010


UPDATE: The city commission will discuss possible layoffs and other ways to cut back at 5 p.m. today at City Hall.


If nothing changes, the city will be broke by 2011.

That’s according to the finance committee, which gave revised budget projections at its monthly meeting Friday morning.

The city will lose $1.65 million this year, the committee said, leaving Sandusky with a $2 million cash balance at the end of 2009.

By the end of 2010, that cash balance will be down to $256,000. By the end of 2011, the city will be more than $1.8 million in the red.

“This should come as no surprise to anybody,” said Al Nickels, one of the committee members. “We’ve been telling everybody the train was going down this track for a while.”

The situation could even get worse, said Hank Solowiej, the city’s senior accountant.

He said the projections are based on no raises for city employees, and that some tax revenues stay the same.

But the unions’ contracts expire at the end of this year, and negotiations for new contracts will begin in September. If the unions get any raises in their contracts, the budget’s bottom line would get much worse.

And if the city’s population continues to decline, the city will also lose more income tax and estate tax revenues than they’ve already lost.

The city may even have to borrow money to pay payroll as early as April 2010, ex-officio mayor Craig Stahl said. Ed Widman, the city’s finance director, said the city would borrow money from places like the water and sewer fund if that situation arose.

“And that could happen even earlier than April 2010,” said Dan Moncher, another committee member. “You never know what kind of (other revenue declines) are going to come up. ... There’s no rainy day fund anymore.”

Nickels and other committee members suggested some sort of tax hike — possibly a 0.33 or 0.5 percent income tax increase — to ease the city’s financial burden.

Last winter, the committee said a 0.25 percent increase would raise $1.5 million per year, but on Friday, they said a 0.33 percent increase is probably what’s now needed to raise those funds because of the number of lost jobs.

Nickels championed an income tax because it affected a large population.

“It’s got to be fair and equitable and not on someone’s shoulder,” he said. “It’s got to be broad-based.”

He also suggested a 0.5 percent increase to ensure financial stability down the road.

But Brent Gardner, another committee member, wasn’t as supportive of an income tax increase.

“That affects a whole lot of people who are working four days a week or three days a week, who already don’t have enough income as is,” he said.

As for other revenue-raising ideas, the committee discussed a possible street light assessment, which the general public wouldn’t have to approve.

In that scenario, residents might only have to pay for the street lights near them, or all residents could pay an equal amount.

“There’s a couple of different ways to do it,” Widman said.

But the committee made it clear the city needs to start saving money now — at least $100,000 per month — and the only way to do that is through cuts.

Committee member Gardner estimated the city would need to cut 15 people to save the necessary money. Others suggested some combination of cuts and increased taxes and assessments would be the best route.

“I can’t be asked to make more cuts and not cut services,” said city manager Matt Kline. “That’s what’s left.”

Kline also said he wasn’t sure layoffs actually save the city money because those laid-off employees wouldn’t have disposable income to spend at the city’s attractions and restaurants.

But Sharon Johnson, a local political activist, said the city should cut some of the administrative assistants and secretaries at City Hall.

Earlier this year, Kline announced eight layoffs throughout 222 Meigs St., but on Friday, he said only six were actually laid off, because two wouldn’t have affected the general budget.

He also said the city has hired two firefighters to avoid overtime, as well as a dispatcher and John Hancock, the city’s new director of the consolidated department of planning, engineering and development.

Solowiej noted the city has successfully reduced its expenses by 7.5 percent this year, but its revenues are still down 10 percent overall.

Income tax revenues and investment revenues have been hit especially hard: Both are down more than $250,000 compared to 2008 revenues.