March 23, 2006

By Robert Mihalek

Village Manager Eric Swansen said last week that the Village should pursue a new 10-year property tax levy to address deficits in four of the government’s budget funds and to pay for needed capital improvement projects.

Money from the levy would be used to pay for daily operational costs in the Village general fund, which includes the Police Department and administrative functions, and to pay capital improvements for the Village utilities, streets and activities in the general fund, Swansen said.

In an interview last Friday, Swansen said he plans to recommend that Village Council place the levy on the November 2006 ballot for voter approval.

He said he has not yet determined the levy’s millage or how much revenue it would generate.

At the same time, Swansen said, the Village will try to reduce costs by offering early retirement to Village employees “across the staff.” Jobs and responsibilities could be combined as some staffers retire, or positions will simply not be filled, he said.

He said there was a “high probability” that the “number of people that are employed by the Village on Jan. 1 will probably be higher than the number of employed on Dec. 31.”

In addition, Swansen said, the Village will seek to further reduce costs by becoming more efficient and by reviewing the scope of services.

Driving these plans are increasing operational costs, insufficient revenue and the large number of capital improvements the Village must address.

On Monday, Council approved the first reading of the 2006 Village budget, which includes a total deficit of $964,089. (See related article.)

In the 2006 budget, four funds are projected to have expenses — when capital improvement costs are factored in — that are larger than revenue, meaning that the funds will incur deficits. This will lower the reserves, or money set aside at the end of the year, in each of the funds.

Swansen said the reserves for the three main utilities — electric, water and sewer — are being drawn down to levels “I’m not comfortable with.”

Here are the total deficits in the four funds:

• Electric: $362,108
• Sewer: $92,196
• Water: $145,291
• General fund: $368,348

The utilities are facing some “extraordinary capital needs,” Swansen said. These are expensive projects that “absolutely need to get done,” he said. Some of the projects have been identified, he said, but the Village has not had the money to complete them.

Based on information and prices from 2004, in a 10-year capital improvement inventory prepared by the former Village Manager, the Village has identified over $9 million in future capital projects.

The most pressing project may be in the sewer system, which is being mandated by the Environmental Protection Agency to upgrade its wastewater treatment process to address high levels of phosphorous in the effluent, or water that is discharged to the Little Miami River.

The problem is the Village does not have the funds to complete the upgrade, according to Swansen. The engineering alone would cost $65,000, he said, although he does not have actual improvement costs.

The project has been left out of the 2006 budget, although Swansen stressed that the Village has “a responsibility to address” the treatment process.

The budget also includes what Swansen and Village staffers consider priorities: $204,040 to upgrade a power line on East Enon Road; $314,088 to upgrade the water line on South Walnut and Short Streets; $615,022 to replace part of the Dayton Street sewer line and water line (funded in part by a $461,313 grant); and $185,963 to construct a new crew building at the Public Works facility.

Swansen said the Village’s budget gave “cause for significant concern that our community is really going to have to understand.”

“We’re at a critical point here,” he said. “We’ve got to take some affirmative action to set this course and get on it.”

Property tax proposal
Swansen said he will recommend that Council seek voter approval of a new property tax levy for at least 10 years. The funds would be used to pay for operations in the general fund and capital improvements in this order: sewer fund, streets, water fund, electric fund and general fund.

Council members could choose to pursue a different property tax or an entirely different plan to generate more revenue. For instance, Council has discussed the possibility of asking voters to approve tax levies for specific purposes, such for the parks system or street maintenance.

Though Council has a goal of pursuing job growth and economic development, the creation of new jobs could take time, so Swansen sees the new property tax levy as a short-term solution.

“People will see this as an opportunity [and] the community will come together to solve a problem,” Swansen said of the property tax proposal.

Yellow Springs property owners pay $51.958 in residential property taxes per $1,000 of assessed value of property, according to information provided by Swansen, who cited as his sources Greene County rates of taxation for 2005 and the city of Columbus income tax database.

Of those property taxes, $2.60 per $1,000 of assessed value goes to the Village government. This rate is the lowest among municipalities in Greene County, according to Swansen’s analysis. The next lowest rate is Cedarville, $5.05, and the highest is Bellbrook, $17.50.

The Village generates most of its funds for general fund purposes through its 1.5 percent income tax.

The Yellow Springs school district also has an income tax, 1 percent, and receives funds from property taxes and the state.

A new property tax could decrease the Village’s dependence on income tax revenue, Swansen said.

Voters would have to approve an increase of the Village’s property tax rate, Swansen said, because of the amount of taxes charged by the school district, Miami Township and Greene County.

According to Swansen, the Village has never sought voter approval of a property tax for general government services. The existing Village property tax is called inside millage and did not have to be approved by voters.

Swansen said the Village’s utility rates are too high to seek an increase instead of the property tax levy. By pursuing the levy, he said, the Village would not increase rates this year.

Changes to staff, services
To reduce costs, Swansen said, he will first offer early retirement packages to employees. He said he does not know the number of staff members who would be offered the option.

The Village has offered early retirement to employees in the past, Swansen said.

During a budget workshop on March 9, Swansen said that a “different organization” will emerge from this effort. He said he would base employment on “merit and fitness.”

“I need the best and the brightest to step forward,” he told Council.

As employees retire, jobs may be combined, positions may not be filled and remaining or new workers will be given more responsibility, Swansen said.

Any reduction in staffing will have to be balanced with the importance of not postponing improvements to the Village’s infrastructure, according to Swansen. This means ensuring that the Village Public Works crew has people in the field to maintain the infrastructure, he said.

If the Village “can’t get a handle” on making cuts “across the board to get as efficient as we can” and it can’t find additional resources, the government will have to look at staffing levels in the Police Department, Swansen said.

Swansen said it was too early to know whether actual layoffs would be necessary. That could depend on the impact early retirement has on the Village budget, he said.

Swansen said the Village will “look very hard at our overhead and the level of services we provide based on the resources we have.” He added that the Village “still wants to [offer] exceptional services.”

The review would include accounts payable and receivable functions, human resources and payroll, he said.

The Village could reduce some costs by improving what Swansen described as its “cumbersome” purchasing procedure and by closing the utility billing window in the Bryan Community Center for part of the lunch hour.

Costs could be reduced by eliminating the Police Department’s dispatching system and joining the planned Greene County Dispatch Center. But this would not result in immediate savings since the regional dispatch service is in the planning stages and, Swansen estimated, is two years away from opening. The Village also does not yet know how much it would save by joining the venture.

Other partnerships could be explored with Miami Township, Swansen said.

The Village could also increase some revenue by raising user fees for services.

The ideal thing, Swansen said, would be for the Village to “invest wisely and prioritize capital projects we need to do in such a way that reduces our capital costs to free up money for operating costs.”

Contact: rmihalek@ysnews.com