City clarifies deficit, savings for Council

October 21, 2009

Akron City Council members received a clearer picture of where the city stands financially during a special caucus held Monday afternoon.

Akron Finance Director Diane Miller-Dawson reported that after a variety of cost-saving measures enacted through September, the city has reduced its overall $10 to $12 million budget deficit, and further savings are expected to produce a balanced budget by year’s end. 

“We held the caucus so that all Council members can be on the same page and understand what was done to cut expenses through September,” said Council’s Budget and Finance Committee Chair Tina Merlitti (W-7). “We have three more months to go. If the trend keeps like it is, we think we’re on track to break even and balance the budget.”

Revenue in the way of a $2.2 million grant to the city from First Energy Solutions, as well as cuts like layoffs, furloughs, and reduced leaf removal and Lock 3 holiday programming are credited for $10.4 million in savings through October 1, Merlitti said.  The deficit is expected to be further reduced as savings from other cost-cutting measures employed are tallied up, she said.

“The current budget shortfall is $8.2 million, but we still have October, November and December to be realized,” Merlitti said. “We won’t truly know the total deficit or how much we’ve saved on other line items until the end of the year, but we’re hoping to balance and close the deficit over the next three months,”

Initially estimated at $10 to $12 million, the city’s deficit was later adjusted to between $7 and $8 million after the first round of layoffs in the summer. Merlitti said the deficit largely resulted from a decline in tax revenues the city collected over 2009, as job losses and foreclosures stung the local economy.

The city notified Council that reductions in all three sources of 2009 tax revenue – income, real estate, and state and local government – account for the $8.2 million deficit. Because of Akron’s heavy dependence on tax revenues relative to other cities, Merlitti said Moody’s downgraded the city’s municipal bond rating from A1 to A2.

“Because we are so dependent on income taxes, and income taxes are going to be slow to recover, we anticipate the need to make further expenditure reductions into next year,” Merlitti said. “That’s why Moody’s lowered our rating.”

An “A” rating indicates above-average creditworthiness. The numeric modifier of “1” indicates the highest end of the ranking category, and “2” indicates a midrange ranking.

Merlitti’s committee also reviewed the city’s expenditures with regard to memberships with various associations and organizations, and decided Monday that the $362,000 in membership fees was justified.

Council had delayed approval on a September request by the city’s finance director to pay annual fees to the organizations, which range from mandatory memberships with environmental and sewage associations to the National League of Cities and the Ohio Municipal League.

“Some of the non mandatory memberships are important to the city,” Merlitti said. “We receive information about grants and some of those organizations offer a lot of lobbying power for the city and for the mayor.

“It would be much more expensive for us to hire our own lobbyist, plus when a lobbying group represents a large organization like NLC, it’s a lot stronger.”

The city spends $15,000 for its NLC membership. The highest annual expenditure is a $90,000 public water license fee paid to the Ohio Environmental Protection Agency.