The city is starting 2014 with a couple of budget conundrums.
In one case, the city’s income-tax and business-profit-tax collections in 2013 were $2 million less than budgeted largely because companies in Youngstown didn’t do as well financially as the city had anticipated.
In the other, city officials are uncertain as to how to spend $2.86 million it received last week from Vallourec Star.
As for the tax-revenue decline, the city received $42,133,700 in income and profit taxes last year, but had projected collecting $44,157,000.
The city had forecast a 4 percent increase in income and profit taxes in 2013 compared with 2012, in which $42,471,700 was collected. The taxes go toward the general, police and fire funds.
The city had projected collecting $6.8 million in business profit taxes last year — a modest increase from the $6,779,100 it received in 2012.
Instead, the city received just $4,669,700 from businesses.
The city receives income tax revenue from a 2.75 percent tax it imposes on those who work or live in the city and a 2.75 percent profit tax paid by companies.
“It’s a combination of a couple hundred companies that didn’t have the profits we expected,” said city Finance Director David Bozanich.
“It appears, at least in the city of Youngstown, that companies kept employees working but didn’t make as much of a profit as expected.”
Revenue from Vallourec Star [formerly V&M Star], which opened a $1.1 billion expansion plant in late 2012, “was less than we expected,” said Bozanich, who declined to discuss it further.
The city collected 4.6 percent more in individual income taxes last year compared with 2012. That’s very close to the 4.9 percent increase city officials expected.
The city made up the $2 million difference between what was collected and what had been anticipated in a number of ways, said Bozanich and Deputy Finance Director Kyle Miasek.
Some were expenditure cuts in 2013 that will be paid this year. That includes the postponement of a $160,000 sidewalk improvement program, and paying the remaining $800,000 bills this year for two projects that started in 2013, but are not yet completed — a new fire station on the South Side, and elevator and window replacement at the city-owned 20 Federal Place building downtown.
The city also received close to $1 million in unanticipated revenues. Youngstown received $330,000 more in state gambling casino taxes than expected – the total topped $1.3 million – and $500,000 more in inheritance tax than budgeted. Also, the city received a $150,000 refund from the Regional Income Tax Agency, which administers its income tax collections.
After two years of overestimating tax revenues by at least $2 million, city finance officials say they’ll be more conservative this year, but aren’t ready to provide a projected number yet.
But Bozanich said, “We’re not anticipating any significant growth.”
Meanwhile, the city received $2.86 million last week from Vallourec Star, the company’s second of three payments in that amount to Youngstown as part of a land-lease agreement.
It was used last year to pay for capital-improvement projects and equipment purchases.
A third check for the same amount will be paid in January 2015, and then the company will pay $100,000 a year to the city for the next 96 years.
The city administration says the Vallourec money provides one-shot sources of revenue, but has never developed a financial plan as to how it would spend the money.
Last year, the city used the money as part of a capital-improvement program. It was used along with some casino tax revenue and a portion of the $2 million it saved by offering early-retirement buyouts to some of its workers, most of whom haven’t been replaced.
The big-ticket items on that capital-improvement list, which used $5 million in general-fund money, last year included the new $900,000 fire station, the $1.5 million for new windows and elevators at 20 Federal Place, $840,180 for housing demolition, and about $1 million for the city to use as matching local money for business- development projects largely funded by the state or federal government.
Without the Vallourec payment, “to make those much-needed capital improvements would have required the city to borrow the money and pay it back over a 20-year period,” Bozanich said. “Instead, we’re paying them off over a two-year period. There are a lot of communities that wish they could [pay for] projects without long-term borrowing.”
The capital-improvements list won’t be as significant this year. The city already has committed $960,000 toward the completion of the South Side fire station, improvements to 20 Federal Place and the postponed sidewalks project.
Mayor John A. McNally wants to use the Vallourec and gambling money for capital improvements, but said he can’t commit to that until he knows more about the city’s finances this year. City council has until March 31 to pass the 2014 budget.
“I don’t want to say that Vallourec money and casino money will be used for specific purposes,” he said.
When asked if those two pots of money could go to supplement the general fund if it has a deficit, McNally said, “Everything is possible.”
Well, not everything, he acknowledged.
The Vallourec money, McNally said, is short-term funding that ends next year so “to say, ‘We have a whole bunch of excess money in the general fund and can spend it on [pay raises]’ would be the wrong thing to say.”
McNally said he is hopeful the city will receive money from the Ohio attorney general and the federal Hardest Hit fund for demolition. Even if Youngstown receives money from other government sources, McNally said he wants to make sure the city sets aside other money for demolition.