Youngstown coffers to grow by about $11.5 million

By David Skolnick


Two revenue sources — money from V&M Star to lease land to that company and its share of state gambling casino taxes — will boost the city’s coffers by $11.5 million during the next three years.

So what will Youngstown do with the unbudgeted windfall?

The city plans to spend as much as it can on economic development, infrastructure improvements and housing demolitions, said Mayor Charles Sammarone and Finance Director David Bozanich.

But how much will they spend on those key initiatives is unknown, even for this year, as the finance department prepares the 2013 budget proposal for city council’s approval. Council, which has to adopt the 2013 budget by March 31, is having hearings without a complete proposed financial plan.

Because the V&M funds — $8,573,805 spread out over three annual equal payments — are one-shot sources of revenue, the city won’t use it to cover employee salaries and benefits or hire new workers, said Sammarone and Bozanich.

“We consider it as one-time revenues to the system and it will be used for one-time improvement work in the city,” Bozanich said. “We know it’s not a long-term revenue source. We’ll use it for infrastructure, economic development and quality-of-life issues.”

But how much will go to each category hasn’t been decided, he said.

And the state’s casino- tax revenue is ramping up quickly. The city could take in more than $1 million this year, in 2014 and 2015. With one more casino yet to open, that revenue could rise.

For years, the city’s budgeting plan has remained the same. The finance department doesn’t provide a proposed budget to city council until late February or in March. Council has budget hearings, some without the benefit of a complete financial proposal for most of those meetings. Then council approves a budget by March 31 with the financial plan tweaked if needed throughout the year.

There is no long-term planning or even a three- “year financial guide to guarantee the $11.5 million will go to specific areas outlined by Sammarone and Bozanich.

To drive home that point, Bozanich said the V&M money could be used as a “safety net to offset general- fund shortfalls. I’m not saying that’s what we’d use it for,” but there is no guarantee it might not be used for that purpose.

This will be complicated by a change of the guard after the Nov. 5 general election, as Sammarone will cede the mayor’s office, opting to run for city council president. And Bozanich – chief budget planner for the city – is retired but rehired to finish the year.

“We need a more specific plan,” said Councilman Paul Drennen, D-5th, a member of council’s finance committee. “If I’m a business and I get [$11.5] million, I’m going to show my stakeholders a strategic plan for those three years. Here’s the money, and here’s the amount we’re going to use for economic development, here’s the amount for demolition. We need a clear-cut plan for the money.”

The city received the first $2,857,935 payment from V&M on Dec. 21, 2012, and will get equal amounts on Jan. 1, 2014, and Jan. 1, 2015.

“The highest priorities are economic development and neighborhood improvements,” Bozanich said. “We want to use the money the best way we can.”

The city is spending $1 million from its general fund, $1 million from an attorney-general program and $475,000 in community- development agency money this to take down vacant structures in neighborhoods.

Those funds will allow the city to demolish about 325 to 400 houses this year. Also, the city street department is taking down about 15 to 20 vacant houses a month.

Sammarone’s goal is 1,000 houses razed this year. There are about 1,070 vacant houses in the city that need demolished now and about 4,000 empty homes in Youngstown.

“We have this influx of money,” Sammarone said. “Any money we have I want to put into demolition and economic development. But until the final budget is done, I don’t know how much money we have.”

As for borrowing the $11.5 million in advance of V&M’s final two payments and anticipated gambling revenue to make an immediate and huge impact on residential demolition, city officials are hesitant.

That money would allow the city to demolish about 1,100 to 1,200 structures.

“What happens if V&M doesn’t come through” on the money? asked Sammarone, who acknowledged that’s not likely. “You can’t spend it before you get it.”

Both Sammarone and Bozanich stressed they expect V&M’s new $1.1 billion expansion project to be a great success.

Borrowing the funds in anticipated revenue bonds could also impact the city’s need to borrow money for other projects, Bozanich said.

When asked if it would be wise to borrow that money to help pay most of the remaining $11.3 million the city owes on the Covelli Centre for its share of its construction, Sammarone said anything is possible.

But he also said with his departure at the end of the year as mayor, his successor should decide what to do with the V&M money in 2014 and 2015.

The first $2,857,935 check from V&M is in the city’s general fund along with $584,955 the city has received since July 2012 from casino-tax revenues. Of that amount, the city received $274,706.05 this month for its quarterly distribution of gambling money from the previous three months.

Gambling revenue of about $1 million is likely this year and next year with the possibility of hitting that amount again in 2016.

Casinos in Cleveland and Toledo opened in May 2012, and one in Columbus opened in October.

A Cincinnati casino will open next month, which likely will increase the tax- distribution amount.

Gambling revenue could decline over time after the opening surges of customers to the casinos, Bozanich and Sammarone said.

“The casino appeal could wear off and we could go from $1 million to $400,000” over time, Bozanich said.

Some of that gambling money may need to be used to offset the reduced local government fund money from the state that dropped from $2.6 million in 2010 to about $700,000 this year, or to make up a decline in income taxes, Bozanich said.

“I don’t know how much of a windfall it will be for the city when we’ve lost local government funds,” Bozanich said.

The city saw a drop in its income tax collection last year. The city took in $42,471,000 in income tax revenue, down from $43,948,900 in 2011. Also, the city’s finance department projected $44.9 million in income taxes, so the amount taken in was 5.4 percent less than the projection.

But Bozanich projects a 2 percent to 3 percent increase in income-tax collections for this year.

Also, the city is saving about $2.4 million this year through an early retirement buyout, growing to about $4 million next year. Those savings will help the city with its cut in local government funds and with income tax declines, but some could be used for demolitions and economic development, Bozanich said.

As for planning what should be done with money from V&M and gambling in 2014 and 2015, Sammarone said those decisions should be left to the next mayor. Sammarone said his job is to leave the city on solid financial footing when his term ends Dec. 31, and that is what he’s doing.

But Drennen said a long-range plan is needed for the city to progress.

“We need focus,” he said. “It doesn’t seem we have that.”

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