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Munroe Falls -- With the city's financial direction described as a "downward spiral," City Council unanimously voted to return two proposed tax issues to the voters on the May 2 ballot.
"We're at a tipping point (with the budget)," said Council President Steve Stahl at Council's special meeting Jan. 19.
One issue proposes to increase the city's income tax rate from 2 percent to 2.25 percent; the other is a five-year, 2.8-mill police levy. Both issues failed at the November 2016 election.
Voters did approve a 10-year, 2-mill capital improvement levy, which is expected to raise $214,000 annually and cost homeowners about $70 annually per $100,000 in market value.
However, due to the receipt of property tax revenue always being six months behind collections, the city is expected to receive only half of the $214,000 in 2017, all in the second half of the year.
The city has estimated the income tax increase would raise $276,000 annually if approved. The city has a 100 percent tax credit, which means that residents working in another community with a local income tax rate of at least 2.25 percent would pay no city income taxes in Munroe Falls if the tax increase passes.
Those working in a community with an income tax rate of less than 2.25 percent would only pay the difference between the two tax rates to Munroe Falls.
The police levy would raise about $300,000 annually for such costs as salaries and equipment purchases and maintenance for the police department. It would cost homeowners just under $100 annually per $100,000 in market value.
Mayor James Armstrong said if it's not passed in May and with officials needing to negotiate contracts, having to make a decision in the future to contract out police services becomes possible.
The deadline for filing the issues for the May 2 ballot with the Summit County Board of Elections is Feb. 1. With that deadline in mind, Council suspended the rules requiring three readings of the legislation and approved sending the two issues to the board of elections.
There would be a cost to the city to place the issues on the ballot, with the city's expense decreasing as the overall number of ballot issues increases. According to the board of elections, all elections come with such costs, including general elections and primaries. Armstrong said during the Jan. 19 meeting that he estimated it would probably be between $8,000 and $12,000, with a maximum of $15,000 but he doubted it would be that high.
Council members discussed the timing of putting the issues on a ballot, looking at May vs. November.
"I believe we need to go in May," said Stahl. "If it fails . . . it would go to November. If it fails [then], we can say to residents, 'this is what your town is - this is what you've voted three times.'"
"We need to provide the citizens with the best services we can until we spend our last dollar," said Councilman Mike Barnes. "We have a plan, we just need the money to do it."
Expenses outpacing revenue
City officials say the tax increases are needed because expenses have outpaced revenues, especially as the city has lost about $175,000 annually since 2010 due to the state eliminating the estate tax and reducing municipal share of sales taxes. The city is currently operating on a temporary budget, but is preparing a permanent 2017 budget that, under state law, must be approved by March 31.
City officials have said they are working on cutting this year's budget by about $300,000, but even this will not make up for the nearly $500,000 in annual budget deficits, which have cut the general fund's cash balance to less than $1 million, less than half of what it was just two years ago.
"A lot of people think we have a lot of money in the coffers," said Councilman Jim Iona on Jan. 19. "They don't understand the rainy day fund. [We've] got to say 'this is serious.' It's in the best interest of the city to keep the services."
But Armstrong said that even $300,000 in cuts will be difficult. "We have a pretty much spartan system to begin with, so trying to cut back, there aren't a whole lot of places to cut back on," said Armstrong during the Jan. 17 meeting.
He noted that an obvious place to cut is the police department, the approximately $1 million budget of which is the single largest part of the general fund, which was approved at $2.2 million for 2016.
But the bulk of the police budget is personnel, so significant cuts in the department's budget could mean at times the number of officers on patrol could be cut from two to one. Armstrong said he wants to avoid this.
"I know [Police Chief Jerry] Hughes believes very strenuously you have to have two officers on duty," said Armstrong. "You need the backup and I don't want to be in the situation of not having that where somebody gets injured. I don't want that on my conscience."
Stahl, a retired Munroe Falls police chief, said this worries him as well.
"Hardly a day goes by you can't read a story in a newspaper where an officer was ambushed and killed or seriously wounded," he said.
Some members of Council said during the Jan. 17 meeting that they understand the city needs money, but are concerned about the perception it may cause if the city pays to place the issues on the May ballot.
"I'm a little concerned about that as well," said Councilor Gary Toth, who serves as chairman of Council's finance committee.
Armstrong said he does not want to spend the money and would not have been supportive of it last year, but the situation this year is more serious.
"I'm really afraid to wait until November because we need to know what we're dealing with," he said.
Iona suggested that the opposite perception may be raised if city officials are willing to put the issues on the May ballot despite the costs.
"That might wake [voters] up and say, 'these guys are for real,'" said Iona.
Law Director Tom Kostoff said that delaying placing the tax issues on the ballot could lead to negative perceptions.
"If these levies are not placed on the ballot, what kind of message would that send to the residents?" he asked. "If we don't place it on the ballot, are they going to have the impression that maybe the city's financial situation is not as crucial as we have indicated in the past?"
Kostoff also said that the city is preparing to enter into negotiations with the city's three police unions. Last spring, the unions agreed to a 10-month extension of their contracts with the city, which would have expired April 1, 2016, in exchange for an extra one-time payment of $400 for full-time officers and $200 for part-time officers at a total cost to the city of $4,000.
Kostoff added a delay in placing the tax issues on the ballot could hamper attempts to get the unions to agree to similar concessions while the city determines where it stands financially.
Iona said this could result in officers leaving for better paying jobs elsewhere, increasing costs as the city is forced to hire and train new officers.
Stahl said he does not believe the city can afford to wait.
"I don't want to spend any extra money either," he said. "However, this year's budget's going to be tough. If we wait till November, then the 2018 budget, I mean you're talking drastic, drastic, drastic, in my opinion, cuts."
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I imagine that the citizens would like to see evidence of the resourceful and imaginative use of the funds, staff, talents, and equipment that are now available to the city. For which federal and state grants is the city eligible? For which ones has the city applied? Councilman Barnes said that there is a plan, "we just need the money to do it." What is the plan? What is the plan if "drastic" cuts have to be made? The citizens approved a long term capital improvements levy at the last election. Specifically, how will those additonal funds be used? A dire picture of the city has been painted with few specifics being provided to convince voters.