April 13, 2006

By Robert Mihalek

Council last week adopted the 2006 Village budget, which includes deficit spending in the four main funds and more than a million dollars in capital projects.

Village Manager Eric Swansen described the deficit spending as “spending down our cash balances in the bank.”

The funds are projected to suffer deficits because expenses, including capital items, are expected to surpass revenues during the year.

The deficits include $362,108 in electric, $92,196 in sewer, $145,291 in water and $368,348 in the general fund, which includes the Police Department and administrative functions and funds the streets and parks.

One of the reasons these funds are using reserves is to pay for capital projects. Swansen said the Village has “a lot of capital projects” that cannot be postponed. “Our infrastructure is managing us,” he said.

The budget includes a total of $1.6 million in capital projects, although the Village has received grant money to pay for portions of some of the projects.

After a discussion and presentation from Swansen on the Village’s fiscal position at its meeting April 3, Council unanimously approved the second reading of the budget.

Levy a ‘immediate-term’ answer

The budget picture has led Swansen to propose that in the November election the Village seek a voter-approved property tax levy. The levy would pay for daily operations in the general fund and would fund capital improvements for the Village utilities, streets and needs in the general fund.

During last week’s meeting, Swansen said he does not yet know how large the tax levy would be. Council must approve the placement of a tax levy on the ballot.

Swansen called a property tax an immediate-term solution. The Village does not have much choice but to seek new revenue “between now and 10 years from now,” he said. The long-term solution, he said, is to return jobs to and create new ones in -Yellow Springs.

In addition to seeking a new property tax, Swansen said the Village could address the budget issue by reducing costs through cuts in service and partnering with other agencies, such as Miami Township, for public works functions, or other Greene County communities, for a proposed central dispatch facility.

As another cutting-savings measure, Swansen has proposed that the Village offer early retirement to some employees. As employees retire, Swansen has said, the Village could combine jobs and responsibilities and not fill vacated positions.

Council member Karen Wintrow highlighted a dilemma the Village would likely face if services are reduced dramatically, saying that service cuts could make the community not as attractive to new businesses and residents seeking to relocate.

“We need to maintain services to attract jobs here,” said Wintrow, who is also the president of the Chamber of Commerce.

During the public hearing on the budget, local resident Joseph Giardullo said the long-term solution to the budget issue is to get more workers in Yellow Springs making what he called “taxable salaries.”

Swansen defined such employment as primary jobs that produce goods and services that are exported from the community. Primary jobs create secondary jobs, which he called positions that rely on primary jobs to create a market for goods and services.

In a memo, Council member Bruce Rickenbach said the budget requires commitments from Council and the community to spend no more public funds than necessary to provide desirable and mandated levels of service; to insure that “we don’t unfairly and inequitably ‘balance’ our desires on ‘the backs of’ loyal, dedicated staff; and to adopt incremental utility rate increases.

Villager Paul DeLaVergne discussed the possibility that the Village could go into bankruptcy, leading the state of Ohio to “take complete control of everything.”

“We could lose our Village if we don’t get more income,” he said.

Council member Judith Hempfling said the Village’s fiscal pressures could put pressure on “things we value in the community,” such as affordability and economic diversity. She lobbied for a “public conversation” to generate “a lot of creative thinking” on the budget problems.

By the numbers

The general fund’s revenue is expected initially to be greater than daily expenses, by $705,709.

But after transferring over $1 million to other Village funds and spending $59,678 in capital costs, the general fund is projected to reach a deficit, and begin to spend down its reserves. Those transfers include revenue, or subsidies, to the street fund ($400,000) and the parks fund ($367,308), both of which Swansen considers separate activities from the general fund.

By the end of 2006, the general fund is projected to have $114,080 in reserves, or 4.59 percent of the fund’s daily expenses, except for capital costs. The fund’s year-end balance is projected to decline $366,848, or 76 percent, from its position at the beginning of 2006.

Swansen presented information at the Council meeting showing that, without new revenue or considerable spending cuts, the general fund is projected to end 2007 more than $225,000 in the red.

The sewer fund’s revenues are expected to be greater than the fund’s expenses by $23,995. However, capital costs, totaling $116,191, will force the sewer fund to use almost half of its reserves.

At the end of 2006, the sewer fund is projected to have a reserve of $112,473, which is 45 percent, or $92,196, less than its beginning balance for the year. The fund’s year-end reserve is projected to be 14 percent of daily expenses.

Because of the sewer fund’s low reserves, the Village has postponed a project to upgrade the wastewater treatment process, Swansen said. The Ohio Environmental Protection Agency has told the Village it must upgrade the wastewater treatment process to address high levels of phosphorous in the effluent, or water that is discharged in to the Little Miami River.

The electric fund is expected to incur an operating loss of $223,358. With the inclusion of $310,000 in capital costs, the fund will have to use more than a quarter of its reserves. By the end of 2006, the electric fund is expected to have a $1,064,621 balance, which is $380,608 less than what it started the year with. The 2006 year-end reserve represents 32 percent of the electric fund’s day-to-day costs.

Revenue in the water fund is expected to be greater than operational costs by $116,319. But when capital costs are factored in, expenses in the water fund will exceed its projected revenue.

The water fund is expected to end the year with $249,085 in reserves, a decline of $145,290, or 37 percent, from where it started in 2006. The fund’s 2006 year-end reserves represent almost 53 percent of the fund’s yearly operating costs.

2006 capital projects

The largest capital projects in the budget include:

• $185,963 for the construction of a new building for the Public Works crew. The costs are being shared among the electric, parks, sewer, streets and water funds.

• $615,022 to complete the Dayton Street sewer line project, from Wright Street to East Enon Road. The Village’s costs are offset by a $461,313 state grant. The project also includes upgrading part of the water line on the street and resurfacing the road, from Stafford to East Enon.

• $204,040 to upgrade a power line on East Enon Road to improve the system’s reliability, Swansen said.

• $314,088 to install a new water line on South Walnut and Short Streets and resurface the roads. Funds for the project will be split between streets ($141,339) and the water fund ($172,748). The project will improve water pressure to fight a fire downtown and will improve the condition of South Walnut.

Contact: rmihalek@ysnews.com