Youngstown leaders balance many factors to draft $47M 2022 budget
YOUNGSTOWN — Youngstown city officials are examining several key issues as they develop the 2022 budget.
One is the city’s income tax revenue.
Despite not knowing how much in refunds will have to be given back, the city expects a 1.1 percent increase in its income tax collections this year.
Finance Director Kyle Miasek is projecting $47,440,000 in revenue from the city’s 2.75 percent income tax.
The city collected $46,931,000 last year from the income tax (including $225,000 that came in from corporate tax collected by the state and transferred to Youngstown). It had budged $43,601,000, which would have been a decline from the $44,404,600 received in 2020.
Miasek said he is optimistic the number would continue to grow this year, based on the recovery last year.
The projected income tax would be even more than the $47,133,500 the city collected in 2019, the last full year before the COVID-19 pandemic.
Miasek said he has concerns about refunds. This is a result of a state law that allows people, starting with the 2021 tax year, who used to work in municipalities that charge income taxes such as Youngstown, and now work from home in non-income tax communities as a result of the pandemic, to seek refunds.
Those refunds wouldn’t be processed until after the April 15 tax deadline.
While the law wasn’t in place for the 2020 tax year, Miasek said the city received 140 refund requests totaling $212,000 for that tax year from people who believed it had taken effect.
“It’s an indicator of what we’ll likely see” from those wanting 2021 refunds, he said.
Miasek is in the process of building the 2022 budget with city council having until the end of March to adopt it.
There are a lot of other issues to address with this budget as well as looking at the city’s finances for the next few years, Miasek said.
“In my six years on council, this is the most challenging with the budget,” said Councilwoman Lauren McNally, D-6th Ward and chairwoman of the finance committee. “We’re in a tricky situation to find the right balance to wisely spend for services and needs, have enough for salaries and benefits and have money in case we get hit with massive refunds.”
One of the major issues is the city’s decision to give out the largest pay raises in a couple of decades, Miasek said.
Firefighters and police officers at the top of the scale, which includes most of them, received a pay increase of 2 percent this year and will get 2.5 percent annually in 2023 and 2024.
Those are the percentages the city will give to its other employee unions for those years, Miasek said.
The pay increases will cost the city’s general government fund $995,635 this year and $1,232,780 in 2023.
“It will be even higher in 2024,” Miasek said. “In 13 years, our labor force got a 7 percent overall raise. Between 2022 and 2024, they’ll get that same 7 percent. It’s because of the labor market.”
Though the city cannot use its $82,775,370 federal American Rescue Plan Act money to directly pay for salaries and benefits, it is permitted to reimburse its general fund for income tax revenue lost during the pandemic, Miasek said.
Cities can use the previous three years before the pandemic and compare it to 2020 and 2021 income tax revenues, he said.
The city is permitted to recoup $3,930,400 for lost revenue in 2020 from ARP, Miasek said.
The administration hasn’t asked city council to consider legislation to do that, he said. It hasn’t been determined if or when that request will be made, Miasek said.
“What I don’t want to see is that $3.9 million in ARP money put aside for wages and benefits, but we have contracts in place that we have to fund,” McNally said. “We need to look down the road five years from now. It would be easy to kick it down the road, but that’s not the responsible thing to do.”
Based on Miasek’s projections, the general government fund will end 2022 with a surplus of $812,940. The fund ended 2021 with a $2,344,830 surplus.
That 2021 surplus was a considerable decline from what the city had at the end of 2020: a $7,196,691 surplus.
The main reason for almost all of the $4,851,860 decline was to satisfy state audit findings that showed the city improperly spent $4,415,332 from its water fund ($2,653,169), wastewater fund ($1,612,163) and environmental sanitation fund ($150,000), primarily for economic development dating back to 2017 and 2018.
State audits for those two years stated the money for that purpose should have come from the general fund.
Because the general fund had so much money in it — largely as a result of a $5.3 million federal COVID-19 relief fund payment in 2020 — city officials decided to make the reimbursements.
Also, effective July 1, 2020, the city raised its monthly water rate by $10 while reducing the environmental sanitation fee by the same amount in an effort to stabilize the water fund. It reversed a $10 switch in 2015 from the water fund to environmental sanitation.
Miasek projects the water fund will end this year with a $3,136,636 surplus with wastewater having a surplus of $18,414,623 and environmental sanitation ending the year with $985,757.
Regarding the projected $812,940 general government fund surplus, McNally said: “Some of us wanted to talk more about street repaving. It’s going to be a tricky budget. I’d like to see the ARP plan before adopting a budget, even an outline of a plan.”
Councilman Mike Ray, D-4th Ward, said he opposes using the surplus for paving.
“We need to maintain caution,” he said. “We need to retain a reserve further into the year. Everything is unprecedented. You’re allowed to replace lost income tax with ARP money so I’d want to see how much we’ll lose as the year goes on before making that decision. Also, how do we keep absorbing payroll? We don’t want to spend all of our budget on wages, but unless we have structural changes, what do we do?”