Toledo’s dire 2016 budget situation — which will be a $20 million shortfall without spending cuts or fee and tax increases — was apparent to Mayor Paula Hicks-Hudson and her top officials weeks before she won a special election to keep the mayor’s office.
It was bad news she didn’t share with Toledo voters.
The shortfall predicted for next year’s general fund budget was initially $30 million when city directors submitted budget requests in early September, but those “wish lists” were pared down, the mayor said.
“It’s a process by which the budget is presented, and we have been working on it,” Mayor Hicks-Hudson said.
The mayor said she did not withhold the gravity of the budget problem from the public during the mayoral campaign and that she will give Toledo City Council a balanced-budget proposal before Sunday’s charter-mandated deadline.
“I don’t know how you can say I was hiding anything,” she said. “We are still working on the budget, and hopefully we will have everything done by [today].”
The city will have $4 million deficit this year, a fact that was disclosed before the election. Even with the adjustments made so far, the city is on track for 2016 spending to outpace funding by an additional $16 million if the budget does not include cutbacks or revenue increases.
Several Toledo councilmen said they knew the 2015 general fund would close with a $4 million negative balance. The deficit was caused chiefly by lower-than-expected revenues this year from the 2.25 percent payroll tax, below-budget red light and speed camera citation revenue, and over-budget overtime costs for the safety forces.
None said they were aware of the severity of the 2016 budget problem.
Councilman Sandy Spang, who was among six challengers to Mayor Hicks-Hudson in this month’s election, said there were no indications offered to council.
“The number that has been discussed is the $4 million [carry-over deficit], so reading in the newspaper the $20 million figure was news to me,” Ms. Spang said. “If the mayor had been transparent about our true budget condition, it would have impacted the conversation, especially in light of my priority-based budgeting message.”
Councilman Matt Cherry, a Democrat who supported the endorsed Democratic mayor, said he too was caught off guard by the $20 million estimate.
“I wasn’t aware of that much,” Mr. Cherry said. “I heard there was going to be a need for cuts, but we haven’t received anything. ... I have been waiting for something to be put on our desks.”
Finance Director George Sarantou told The Blade this week that increasing the city’s monthly trash fee, which is $5 for senior citizens with a homestead exemption and $8.95 for all other households, is among possible budget remedies. Delaying the hiring of new police and fire recruits is another money-saving possibility, he said.
Chief of Staff Bob Reinbolt said late last month — just before the Nov. 3 election — that the city would have a class of 25 firefighters in January and 20 firefighters in July. A police class is supposed to begin training in February. Those dates are now subject to change, Mr. Sarantou said.
Mr. Reinbolt knew when talking about police and fire classes that there was going to be a projected budget deficit, but he never shared that with city council or citizens.
Also, to help balance the budget, Mr. Sarantou said the city will again use up to $11 million from its capital improvements budget in 2016 to help balance the city’s general fund — money that could be earmarked for fixing deteriorating city streets but instead will be used to pay city salaries.
Toledo has used capital improvements fund money for several consecutive years to help fund daily operational costs such as police and fire salaries. That reduced what Toledo was able to spend on road repair and left almost nothing for residential street repaving.
Councilman Lindsay Webb, who supported Mayor Hicks-Hudson’s election bid, said there was no effort to conceal the budget problem.
“The test of her leadership is how she leads us out of it,” Ms. Webb said. “This is the last year we can take CIP money, and the mayor is going to have to come up with how we address that.”
Toledo ended 2014 with a $1.33 million surplus, but that was only possible because $11 million was transferred from the capital improvements plan budget.
“We don’t call it a surplus because you are still taking money out of the CIP to balance the budget,” Mr. Sarantou said.
Much of that was added to the city’s “budget-stabilization fund,” generally called the rainy-day fund. It now has $1.55 million that can be tapped to help balance the 2016 budget, although the mayor said she does not want to use that money.
“We are looking at all possible sources of revenue and ways to increase our collections as well [and] really hold all of the department back to the 2015 spending line,” Mayor Hicks-Hudson said.
Councilman Tom Waniewski, a Republican, said he had no idea “it was going to be this bad” before he read a story on the 2016 budget in Wednesday’s Blade.
“To me, a city budget can be a lot of smoke and mirrors,” Mr. Waniewski said. “We say we will have $169 million from the income tax and we only have $160 million, and you don’t see that until you are at the end of the year. ... We in essence are asked to look into a crystal ball to set up 2016, and I think we should always project lower on income taxes.”
The 2.25 percent income tax was expected to generate $169.56 million this year, the same as in 2007, before the national economic collapse. Mr. Sarantou has said repeatedly for months that amount is unattainable.
The best Toledo can hope for is about $167 million from the tax and $2.1 million from the red-light and speed cameras instead of the budgeted $3.2 million, he said. This is the second consecutive year the red-light and speed cameras did not meet revenue expectations.
Additionally, Mayor Hicks-Hudson said the city budget suffers from decisions that may have seemed correct at the time but later proved costly for taxpayers.
The most obvious to her was Mayor Carty Finkbeiner’s decision in the 1990s to put the city on the hook for the redevelopment of four city apartment projects: the Hillcrest, Museum Place, the LaSalle, and the Commodore Perry. In 2000, the city was forced to begin paying the general obligation bonds on the apartment building projects, which has cost more than $1 million annually since then. The strain on the already austere city budget ranged from $1.7 million in 2010 to $1.65 million in 2015.
Additionally, former Mayor Mike Bell borrowed heavily for road repair and fire stations during his term, and the late Mayor D. Michael Collins negotiated contracts with city unions that offered pay increases to police officers and firefighters that will cost millions during the next several years.
As long as tax revenues rise, the city can afford to pay those raises, but if tax collections stagnate or don’t grow fast enough, the city is stuck paying higher police and firefighter salaries it can’t afford.
The result is no money to fix streets and a crumbling city infrastructure and charging city residents more for everything they don’t have to vote on.
Mr. Waniewski said he voted in January against a new contract with Toledo Fire Fighters Local 92. It granted 0.75 percent annual raises for the three-year agreement and increased the department’s “minimum manning” requirement from 103 to 107. It will go up to 110 on Jan. 1, 2017.
“I knew it would cost us overtime so much and we already had a problem with that,” Mr. Waniewski said.
The minimum-manning requirement has been blamed for the department’s over-budget overtime costs.
The Local 92 contract also increased what the city pays monthly for each firefighter’s medical insurance from $916 to $961 this year; to $985 in 2016, and then $1,010 in 2017.
Rank and file Toledo police got a three-year contract with 0.75 percent pay increases each year.
In the third year, patrolmen with 10 or more years of seniority will be deemed corporals and get a stipend equal to 3 percent of base wages that year.
Past decisions, combined with the drastic nose-dive in annual payroll tax revenues that started in 2008, have snowballed to create a “structural deficit,” Mayor Hicks-Hudson said.
Don Czerniak, president of Local 7 of the American Federation of State, County, and Municipal Employees, said he is skeptical of Mr. Sarantou’s 2016 budget prediction.
“We are going to rename the finance department the department of doom of gloom,” Mr. Czerniak said. “There is doom and gloom every year, and then later in the year they always end up finding money.”
Local 7, the city’s largest union with more than 800 employees, was granted a pay raise in 2014 that cost taxpayers an extra $1.4 million that year.
Toledo City Council voted 11-1 to approve a 2.5 percent wage increase negotiated by the Collins administration and the union.
Mr. Waniewski cast the lone dissenting vote.
Mayor Collins at the time said the pay raise would cost the city’s general fund $209,000 and the rest would be spread out over other funds, including $633,000 from the city’s department of public utilities.
Mr. Czerniak criticized Mayor Hicks-Hudson for increasing personnel spending in the mayor’s office this year and granting pay raises, although he acknowledged those salaries were for high-ranking employees funded by the city public utilities budget. Utilities Director Ed Moore, for instance, received a 16 percent pay increase, from $94,814 to $110,000.
Contact Ignazio Messina at: imessina@theblade.com or 419-724-6171 or on Twitter @IgnazioMessina.
First Published November 12, 2015, 5:00 a.m.
