In recent years, the city of Meadville’s six-week public budget process has typically opened with a preliminary budget that sports a hefty deficit, one that will likely require either staffing cuts, severe service reductions or a significant tax increase.
Though the opening of budget season at City Council’s Wednesday meeting followed the general outlines of that pattern, there was nothing typical about the deficit included in the preliminary 2020 budget.
“In the 22 years that I’ve been here, I think this is the largest number I’ve ever seen being out of whack,” Mayor LeRoy Stearns said in his remarks concluding the meeting. “We’ve got some work ahead of us.”
The “out of whack” number Stearns referenced was a deficit of $656,000 on a projected budget of $10.4 million for next year. Balancing such a deficit with a real estate tax increase would require raising the millage rate, currently 21.92, by approximately 4.5 mills.
The effect of such a raise would be considerable: The owner of a home assessed at the median residential value of $25,000 pays $548 in real estate taxes to the city each year. An increase of 4.5 mills would bring that annual figure up by more than $110 to about $661.
Comparisons to preliminary budget deficits in the past few years reveal just how “out of whack” this year’s starting figure is: Last year the city’s preliminary budget featured a deficit of $270,000. The year before, the shortfall started at $279,000 and in 2016 it was $237,000. In each case, the budget was eventually balanced without a tax increase but not without difficult choices — borrowing $276,000 from the city’s Rate Stabilization Fund last year and, most controversially, eliminating three vacant fire department positions and lowering the minimum shift complement from four firefighters to three in 2016.
“With flat revenues, I just don’t know where we’re going to come up with any means to balance this budget,” Councilman Jim Roha said after the meeting. “We will, but I don’t know how.”
Perhaps the most important ingredient in the various maneuvers eventually taken to achieve a balanced budget is already underway: Council in October began discussion of a refinancing plan for nearly $8 million in city bonds that will likely result in a savings of approximately $300,000, bringing the deficit down to about $356,000 — still significantly higher than the typical starting points of recent budgets. If the plan is approved, the exact savings won’t be locked in until near the end of the year, so the exact amount is not yet known.
The dire budgetary outlook was enough to lead Roha to request city staff to consider the possibility of borrowing an additional $7.3 million to fund the city’s pension liability. The debt would carry a much lower interest rate than the unfunded pension — more than 4.5 percent lower, depending on how the debt was structured. The city made a similar move in 2010, City Manager Andy Walker said, and the move has largely paid off because of years of strong economic growth and low interest rates.
Trying it again could be pushing the city’s luck, according to Walker.
“It’s very risky, I would think, to proceed,” Walker told council. “I’m not convinced that the savings ... are worth the risk.”
Council will next confront the topic with its first public hearing on the budget at 5:45 p.m. Nov. 13 in the City Building, 894 Diamond Park.
Mike Crowley can be reached at 724-6370 or by email at email@example.com.