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Youngstown tax collection $2M less than budgeted



Published: Sun, January 12, 2014 @ 12:10 a.m.

Gap stems from lower profitability of Youngstown companies last year

By David Skolnick

skolnick@vindy.com

YOUNGSTOWN

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.


Comments

1Southside_Res(147 comments)posted 3 months, 1 week ago

I just laugh sometimes! In a flat economy, who the hell forecasts tax revenue increases of four percent?! Then there are recent revelations that Bozanich had 17 recommended changes on a year old audit? Bozanich couldn't get a clean audit if he tried, and he has been doing the same for years. The audit for 2013 will just be a rehash of the same. With this latest "conundrum," just have Bozanich take from one account to supplement another as he has done so craftily before and as pointed out by the state auditor.

City leaders have lost their minds by continually relying on personnel who behave and act more like one of the three stooges. If McNally keeps Bozanich on one more day, he would be a bigger idiot than I thought.

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2author50(1121 comments)posted 3 months, 1 week ago

Well they "found" $75,000 to fund Anthony Farris' new job. I'm sure they will be ok.

They received $1.5 million from DeWine for housing demolition. If each structure costs $5000 to take town that's 3000 structures.

Maybe they could start by getting Chuck Sammarrone Jr to pay back the $20,000.00 he received from daddy to open up Dooneys?

They can always charge people more money for water and say its because of the EPA mandate for phase one that McKelvey promised would start 14 years ago and of course never start on it.

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3SAVEOURCOUNTRY(464 comments)posted 3 months, 1 week ago

Have the charter schools been paying taxes? Spread Eagle academy hasn't paid a dime in over 10years

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4Ianacek(856 comments)posted 3 months, 1 week ago

Council needs to return to the more pro business attitude it had under Williams . Increasing business profits are a sign of a healthy economy & they encourage further investment . McNally has gestured in that direction with the likes of his "one stop shop" idea at Council . It remains to see whether he will follow through and stem the flow od entrepreneurs to Warren .

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5John44(14 comments)posted 3 months, 1 week ago

"Council needs to return to the more pro business attitude it had under Williams ."
We all know that was a joke. Williams used the people and the City of Youngstown as a stepping stone to Washington. When he was mayor there was a void in leadership and all departments in the city had a free for all which Mayor McNally has the pleasure of dealing with now.
Remember Williams used Bozanich as well for 6 years.

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6dontbeafool(786 comments)posted 3 months, 1 week ago

Enforcing and collecting taxes/back taxes is also an issue!

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7lovethiscity(120 comments)posted 3 months, 1 week ago

Lanacek...."stem the flow od (sic) entrepreneurs to Warren".

Do you have a few, independent data points you can cite to validate that statement?

Or do you just want the reader to believe you because your stubby little fingers could type it?

Just askin'.

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8southsidedave(4710 comments)posted 3 months, 1 week ago

The City always "finds" money - not to worry!

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9Adifferentview(7 comments)posted 3 months, 1 week ago

There is no flood to Warren of business. Give Bozanich a medal for making the City float for so many years unlinke other old steel towns that went under financially. I do wonder why not paying the cops instead of keeping political hacks like Ferris and Donofrio and Rohrbaugh in law department. If the cops aren't happy then the City loses more people. They are our first and last lne of defense.

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10Ianacek(856 comments)posted 3 months, 1 week ago

I saw it reported that Youngstown unemployment had risen by 1% ( of the labor force ) & Warren's had reduced by 1% in 2013 . This would be consistent with the stagnant corporate profitability recorded by the Council in the past 2 years . Compare this with the soaring corporate profitability that has boosted the stock market in the same period .So why didn't Youngstown participate ? If there's money to be made everywhere else but Youngstown , why create jobs in Youngstown ?

Compare the websites for Youngstown & Warren & imagine you are a skilled worker or entrepreneur trying to make a decision about where to locate.
http://www.cityofyoungstownoh.org/
http://warren.org/
Its more than just that Warren's sales tax is 0.5% less & its income tax .75% less . Its the impression that Warren is organized, is looking forward not backward & that it actively seeks energy & ideas . Instead of being negative when someone like Jay Williams lands a better job elsewhere or a word has a typo , Youngstown should be growing its own talent & opportunities .

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