Can fiscally-challenged Niles ward off takover by the state?
In 1980, Niles claimed the dubious distinction of becoming the first city in Ohio to fall under fiscal emergency. A 1978 law gave the state authority to take control of the finances of fiscally challenged local governments and school districts.
Thirty-four years later, some rightly fear Trumbull County’s second largest city could be headed down that same embarrassing path. Niles Mayor Ralph Infante has declared the state of Niles finances “a train wreck waiting to happen.” To ward off such a smash-up, municipal leaders must demonstrate thoughtful proactive policymaking toward a comprehensive recovery plan to prevent the long arm of Columbus from grabbing hold of the city once again.
To be sure, the problems befalling Niles are serious. To wit:
At a roundtable meeting of city leaders last week Niles City Auditor Charles Nader revealed that the general operating fund stands at $1.9 million, but if the year ended now, its balance would be zero.
The city’s water and sewer department accounts already log deficits of $2.6 million.
The cost of a mandated new sewage-treatment plant has skyrocketed from $30 million to $43 million.
Collectively, these sharp bites in the city’s budgetary pie raise questions about the scope and intensity of proper financial oversight of city coffers. In May, Nader issued a public apology to city council for a lack of controls that could have prevented a two-year-long scheme of employee theft of more than $71,000 from the treasurer’s office.
The city is also reeling from a misguided $225,000 expenditure to lease accounting software that proved incapable of performing all state- required functions. City Council President Robert Marino called that blunder “very, very poor planning and poor execution — a waste of money.”
Of course, poor planning and lackluster oversight do not account for a sizeable slice of Niles’ woes. Some of the city’s budgetary quandaries have arisen as natural outgrowths of the city’s shrinking population, falling tax base, lingering hits from the Great Recession and questionable state funding policies. For example, Niles has lost $1 million in annual interest income, $100,000 in property-tax revenue and $75,000 in state-supplied Local Government Funds.
TOUGH DECISIONS NEEDED
The net result creates a monumental budgetary stain that will require monumental energy and tough decision-making to cleanse. For starters, city leadership could work to head off the state from a fiscal-caution designation — the first step on a path toward fiscal emergency — by convening a panel of city leaders to draft a realistic recovery plan. Recommendations from a soon-to-be-released performance audit of city government would serve as a solid starting point.
The resulting decisions likely will be painful and may include such expenditure cutting tools as across-the-board layoffs and revenue-enhancing tools as an increase in the city’s 1.5 percent income tax. Any such plan must also create failsafe accountability to prevent such budget busters as embezzlement and improper purchases.
The task will not be easy. But Niles residents have a longstanding reputation for resilience. In the 1980s, the city rebuilt large swaths of land ravaged by a monster tornado. In recent years, the Niles City Schools, under state-mandated fiscal watch, has replaced seas of red ink with black.
We believe the current crisis in municipal finances also can be solved without full-scale state intervention. Toward that end, the mayor, city council, department leaders and state auditor representatives should waste no time in getting started.