LORAIN — A briefing on Lorain’s removal from state fiscal watch was presented to City Council members at their Monday meeting.
Laura Brown, a project manager with the local government section of the Auditor of State, detailed a draft of a three-year financial forecast compiled with Lorain Auditor Ron Mantini’s office.
The forecast predicts a nearly $1.7 million surplus at the end of the year; a $954,000 surplus in 2014; and a $434,000 surplus in 2015.
Brown primarily credited the November passage of Issue 13 — a permanent 0.5 percent income tax hike raising $5.3 million annually and costing a worker earning $50,000 a year an additional $250 yearly — for removal from state fiscal watch.
In addition to paying for road improvements and park maintenance, the tax eliminated a projected $2 million deficit.
Lorain has been on fiscal watch since 2002. The designation was created in Ohio in 1996 to warn communities and school districts in danger of entering fiscal emergency.
Entities in fiscal emergency are taken over by the state Financial Planning and Supervision Commission, an unelected body which controls spending.
Removal from the watch list could save taxpayers money when the city borrows for building and road improvements if Lorain’s municipal bond rating is upgraded.
A better bond rating could reduce interest on a bond by about 0.5 percent, Mantini previously said.
For a 20-year, $5 million bond, Mantini said taxpayers might save as much as $200,000 over 20 years.
Lorain plans to sell between $5 million and $8 million in municipal bonds in early 2014 and the same amount in 2015 for road projects.
Brown said the Issue 13 money will cover for Lorain’s expenditures exceeding revenues in the next three years, but not indefinitely.
The forecast assumes 2 percent annual increases in contracts with Lorain’s unions in upcoming negotiations.
Brown said the forecast — which Auditor Dave Yost is expected to approve later this month, officially taking Lorain off fiscal watch — is based on historical statistics and projections.
“This forecast is as good as the day we did it,” Brown said. “If revenue would fall off unexpectedly, then, obviously, you would have to make corresponding changes to expenditures.”
Lorain’s tax base has dwindled in the last 20 years, and state tax cuts in the last few years have drastically reduced local government money from the state.
Nonetheless, Councilman Dan Given, D-at large, chairman of the Finance and Claims Committee, said previous administrations also were to blame for red ink by overspending.
“We see the error of those ways,” he said.
Contact Evan Goodenow at 329-7129 or email@example.com